DECISIONS OF THE

FEDERAL MARITI IE BOARD AND

MARITIME ADMINISTRATION

DEPARTMENT OF COMMERCE
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 109

FARRELL LINES INCORPORATEDApPLICATION UNDER SECTION 805 a

Submitted April 22 1960 Deoided April 22 1960

Far rell Lines Incorporated granted written permIsSiOn under section 805 a

of theMerchant Marine Act 1936 as amended for its owned vessel the SS

African Pilgrim presently under time charter to State Marine Lines Inc

to be subchartered to Luckenbach Steamship Company Inc for one inter

coastal voyage carrying general cargo from the San Francisco Bay area to

North Atlantic ports commencing on or about April 26 1960 since granting

the permission found 1 not to result in unfair competition to any person

firm or corporation operating exclusively in the coastwise or intercoastal

trade and 2 not to be prejudidal to the objects and policy of the Act

Rona JdA Oapone for applicant

Robert B Hood Jr as Public Counsel

REPORT OF THE MARITIME ADlfINISTRA TOR

By THE MARITIlfE ADlfINISTRATOR

Farrell Lines Incorporated filed an application for written per

mission under section 805 a of the Merchant Marine Act 1936 as

amended 46 U S C 1223 the Act for its owned vessel the SS

African Pilgrim presently under time charter to States Marine Lines

Inc to be subchartered to Luckenbach Steamship Company Inc

Luckenbach for one intercoastal voyage carrying general cargo

in Luckenbach s intercoastal service commencing San Francisco Bay

area on or about April 26 1960 for discharge at North Atlantic ports

The vessel is to be redelivered by subcharterer at an east coast port

Notice of hearing was published in the Federal Register ofApril 14

1960 25 F R 3227 No one appeared in opposition to the granting

of the application

6 M A 1
Luckenbach is a common carrier of general commodities in the

intercoastal trade Itneeds a vessel for an April sailing but has been

unable to obtain any other than the African Pilgrim

It is found that the granting of the requested permission will no

result in unfair competition to any person firm or c9rporation op

erating exclusively in the coastwise or intercoastal trade or be prej

udicial to the objects and policy of the Act

This report shall serve as written permission for the voyage

6 1
FEDERAL MARITIME BOARD

No S 67

T J MCCARTHY STEAMSHIP COMPANy ApPLICATION UNDER SECTION

805 a

Submitted Jan1tary 18 1960 Decidell Apr il Z5 1960

Continuation of bulk service until December 31 1961 between United States

ports on the Great Lakes by T J McCarthy Steamship Company limited to a

coal and ore movement in the event itis awarded an operating subsidy con

tract found not Ito constitute unfair competition to any person firm or

corporation operating exclusively inthe coastwise or intercoastal service or

to be prejudicial to theobjects and policy of the Merchant Marine Act 1936

as amended and written permission for the continuation of such service in

the event subsidy is awarded granted

Paul D Page Jr and A1 tknr Tarantino for applicant

John 11 Eisenhart Jr for Great Lakes Ship Owners Association

and Donald A Brink1o01 th for Eastern Territory R ailroads inter

veners

Edward Schmeltze1 as Public Counsel

SUPPLE IENTAL REPORT OF THE BOARD

Clarence G 1orse Ohairman Thos E Stakem Jr Vice Ohai1 1nn

By THE BOARD

In our original report herein 5 F M B 666 1959 we found

and concluded that 1 the continuation by T J 1cCarthy Steam

ship Company 1cCarthy of its automobile carrying service from

Detroit to Cleveland and to Buffalo in the event it was awarded an

operating differential subsidy contract a would not result in unfair

competition to any person firm orcorporation operating exclusively

in the coastwise or intercoastal service and b would not be pre

judicial to the objeets and policy of the ferchant 1fnine Act 1936

F M B

3

732 047 0 64 2
4 FEDERAL MARITIME BOARD

as amended 46 U S C 1223 the Act and 2 the continuation 

its bulk trade service in the event subsidy was awarded would 

prejudicial to the objects and policy ofthe Act Thus section 805 

permission was granted only for the continuation of the automob

serVlce

On January 4 1960 applicant filed with the Board a petition f

reconsideration and modification of its report praying for sect

805 a

permission to cover its bulk trade service for a period not 

extend beyond December 31 1961 Interveners filed replies in o

position to the petition Public Counsel did not file a

reply

The principal reason advanced by 11cCarthy for the permissi

a

ppears to be that applicant is firmly obligated to carry ore f

Vilson Transit Company and that McCarthy is forced by the Boa

to breach its contract with Tilson or abandon its subsidy application

This argument is a

pristine example of an operation boot strap

The requirements of statutes are not subservient to the provisions 

private contracts The Government is not a party to the Th1cCarth

1Vilson contract Applicant s chief argument is totally without me

and we comment upon it merely because it was put forth with su

stress 1

Ve are disposed however to modify our earlier decision on e

tirely different grounds NlcCarthy s four bulk vessels have a co

bined deadweight capacity of slightly less than 30 000 tons or abo

3 percent of the total deadweight capacity of aU the independe

bulkers on the Great Lakes The remaining independents opera

97 bulk carriers with a total available deadweight of 985 000 ton

In 1957 when 11cCarthy moved about one million tons in this servi

about one half was Vilson ore and the other half consisted chiefly 

coal stone sand salt and grain It is to be noted that 1Vilson do

not oppose the application and it is reasonable to assmne that abse

1cCHrthy s participation Vilson itself would undertake to move t

ore It also follows that if vVilson handled the ore which mov

south from Duluth Superior it would carry a substantial portio

if not all of 1cCarthy s northbound coal movement It does n

necessarily follow hOyever that vVilson would capture the remaini

bulk cargoes particularly grain the domestic movement of whic

on the Great Ln kes is declining Thile we reason that the termin

tion of l1cCarthy s ore and coal business would result in little ifan

benefit to the primarily domestic interveners we are of the view th

modifying our earlier report so as to permit Th1cCarthy in the eve

it becomes subsidized to continue to engage solely in the ore and co

tracles only through December 31 1961 thereby freeing to the p

1

Further applicant s helief that it can reach an agreement with Wilson relating 

to this contract is entirely immaterial

6 F M B
T J McCARTHY STEAMSHIP CO SEC 805 a APPIJIOATION 5

marily domestic operators the remaining bulk cargoes heretofore car

ried by McCarthy would not be prejudicial to the objects and policy

of the Act

vVe found originally that none of the interveners operates an exclu

sively domestic service on the Great Lakes within the meaning of

section 805 a of the Act hence that portion of the section is

inapplicable

Ve therefore grant section 805 a permission for the continuation

of this bulk service limited to ore and coal in the event of the award

to 11cCarthy of an operating differential subsidy contract for aperiod

not to extend beyond December 31 1961 Upon that date the written

permission ifit ever becomes operative shallterminate

This report shall serve as written permission to continue the service

under consideration

6 F M B
FEDERAL MARITIME BOARD

No 8 78

AMERICAN PRESIDENT LINES LTD ApPLICATION UNDER SECTI

805

Submitted NOVember 4 1959 Decided April 8 1960

American President Lines Ltd granted written permission under section 805 

Merchant Marine Act 1936 to operate its proposed superliner SS Presi

Washington and inthe iJlterim the SS President HoO Ver intheCalifor

Hawaii passenger trade SUbject to certain limitations

Grandfather rights of American President Lines Ltd under the provis

section 805 a in re the operations of its transpacific passenger vesse

the California Hawaii passenger trade determined

Warner W Gardner Vern Oountry l1Lan and Peter N Teige 

applicant

Alvin J RJkwell Kenneth F Phillips and Willis R Deming 

Matson Navigation Company intervener

Robert E Mitchell Edward Aptaker and Robert O Ba mford 

Public Counsel

REPORT OF THE BOARD

Clarence G Morse Ohai lJnal 1and Thos E Stakem Vice Ohairm

By THE BOARD

This is a

proceeding under section 805 a Merchant Marine A

1936 as amended theAct to ascertain whetherAmeri an Presid

Lines Ltd APL a subsidized operator should be granted p

mission to carry passengers and cargo between California ports 

Hawaii in its transpacific Trade Route No 29 Line A I service 

the SS President HOO1Jer and subsequently on its proposed sup

liner SS President Washington

APL seeks permission for the Hoover to make eight c

annually on one leg of the transpacific voyage and carry abou

passengers avoyage and for the Washington scheduled to repl

See also 6 FM B 95

6 I HB
AME RlCAN PRESIDENT LINES LTD HAWAiI PASSENGER SERVICE 7

the Hoover in late 1962 to make 11 voyages a

year carrying

about 4 000 passengers and 1 350 LIT of cargo annually

As a subsidized operator APL requires permission under section

805 a of the Act before it may engage in the domestic trade be

tween California and Hawan

Section 805 a

provides in part

The Commission shall not grant any such application if theCommission finds

it willresult in unfair competition to any person firm or corporation operating

exclusively in the coastwise or intercoastal service or that it would be prejudi

cial to the objects and policy of this Act Provided That if such contractor or

other person above described or a predecessor in interest was in bona fide

operation as a common carrier by water in the domestic intercoastal or coast

wise trade in 1935 over the route or routes or in thetrade or trades for which

application is made and has so operated since that time or if engaged in fur

nishing seasonal service only was in bona fide operation in 1935 during the

season ordinarily covered by its operation except in either event as to inter

ruptions of service over which the applicant or its predecessor in interest had

no control theCommission shall grant such permission without requiring further

proof that public interest and convenience will be served by such operation and

without further proceedings as to the competition in such route or trade

Hawaiian Textron Inc and Matson Navigation Company operat

ing as nonsubsidized domestic water carriers between California and

Hawaii intervened in opposition to the application Textron whose

predecessor entered the trade in 1957 withdrew its passenger ship

SS Leilani from the trade shortly after the hearing and did not file a

brief

Hearings were held before an examiner In his recommended de

cision the examiner concluded

1 APL or a predecessor in interest wasin bona fide operation as a

common carrier by water in the domestic coastwise trade in 1935 in its

transpacific passenger and freight service between California and

Hawaii and has so operated since that time except as to interruptions

of service over which APL or its predecessor had no control

2 Subject to a limit of 4 300 and 3 320 LIT of cargo a

year the

service proposed with the addition of the Hoover to be replaced by

the Washington is in substantial parity with that maintained by APL

or its predecessor in 1935

3 A Granting APL permission for the Hoover to carry 160 pas

sengers and 491 LIT ofcargo annually between California andHawaii

will not result in unfair competition to any person operating ex

clusively in the coastwise or intercoastal service and will not be preju

dicial to the objects and policyoftheAct

3 B Granting APL permission for the Washington to carry 4 000

passengers and 1 353 LIT of cargo annually between California and

6 F M B
8 FEDERAL MARITIME BOARD

Hawaii will result in such unfairness and prejudice except a 

the extent cargo 1 353 L T is involved and b to the extent 

carriage of passengers by the Oleveland Wilson and Washing

will not exceed 4332 passengers annually

3 C Since the public interest and convenience will be served 

the operation as limited above permission should be granted to 

extent

Exceptions to the recommended decision and replies thereto 

filed and oral argument was heard Exceptions and proposed 

ings not discussed in this report nor reflected in our findings have 

considered and found not justified by the facts or related to mat

issues in this proceeding

APL has served Hawaii regularly in transpacific voyages since 1

except for 1 a five year period from 1885 1890 and 2 the pe

19421946 In 1925 Dollar Steamship Lina Ltd l

commenced a f

nightly service from San Francisco to Honolulu Yokohama K

Shanghai Hong Kong and Manila returning by way of the s

ports and in 1927 Los Angeles was added as a

port of call In 

the service was provided by seven vessels the OooZidge and 

1oover and five ships ofthe so called 535 class The Hoover and 

Ooolidge sailed from California over the route described abov

Manila and returned to California The 535 s operated in what 

called the New York Manila service calling at San Francisco 

Hawaii in both directions

The 1931 1935 service provided by APL is shown in column 

of the following table

TABLE I

APL S voyages and carryings between Californt a and Hawaii including f

estimates

1 2 3 4 

Cleveland Cleveland Clev

1931 35 7 ships Wilson Wilson W

average 1935 1951 57 Hoover I Wa

average 1959 62 t

Voyages 1 way n n nn n 52 52 32 40 

Passengers n n n 2 671 2 852 1 959 2 119 

Cargo LIT n nn n nn n 3 204 1 965 2 456 

I Columns 4 and 5 estimates are proposed carryings of theHooverand Wcuhington respectively 

to 1951 57 averages in column 3

SinC1 1948 APL has served its transpacific trade on Trade R

No 29 with the Oleveland and Wilson In 1957 the Hoover 

1Dollar was incorporated August 2 1929 In November 1938 the name was ch

to American President Lines Ltd

6 F M 
AMERICAN PRESIDENlT LINE S LTD HAW kII PASSENGER SERVICE 9

added and as far as this record is concerned the Washington is sched

uled to replace the Hoover in late 1962

APL has concentrated on booking Far East passengers serving

the California Hawaii trade only as space is available because the

transpacific trade is its primary trade and is more profitable It

expects to follow this course in the future Since it has to book trans

pacific passengers several months in advance any space unoccupied

approximately three weeks prior to the sailing will not be sold trans

pacific Unoccupied first class space is then offered for California

Hawaii bookings This space it is argued is the only space competi

tive with that of domestic lines 2

APL claims 1 that it has grandfather rights in the California

lIawaii trade and 2 that in any event the service it proposes to

Hawaii would not amount to unfair cOlnpetition to any person operat

ing exclusively in the coastwise or intercoastal trade nor be prejudicial

to the obj ects and policy ofthe Act

We will first consider APL s claim of grandfather rights

It is clear that in 1935 APL was providing service between Cali

fornia and Hawaii Matson argues that APL really had two services

in 1935 one termed by APL its transpacific service was provided

by the Ooolidge and the Hoove r which operated between California

and the Far East the other provided by five ships serving San

Francisco and Hawaii in both directions only in connection with the

service from New York to the Far East Matson contends that

APL s grandfather rights if any must be confined to the service

provided by the Ooolidge and the Hoover in 1935 a service which

conformed to APL s present day transpacific service

We disagree with Matson APL in 1935 actually maintained fort

nightly service between California and the Orient via Hawaii The

act that such service consisted partly of operations over a segment

of an entire route or service is inconsequential Service between Cali

fornia and Hawaii was provided by the vessels in the so called New

York Manila service just as much as the service provided by the

HOQver and theOoolidge in the transpa cific service In determining

the grandfather rights both services should be included

Matson contends that APL was not in bona fide common carrier

operation between California and Hawaii from 1935 to 1938 because

under the Dollar Matson Agreement S APL carried passengers and

cargo as agent ofMatson and paid to Matson half the gross domestic

revenue During that period APL did not advertise for or solicit

II Tourist class Is available and Is booked earUer

I See Dollar Matson Agreement8 1 U S M C 750 1938 2 U S M C 387 1940

6 F M B
10 FEDERAL MARITIME BOARD

cargo and passengers it turned inquiries and requests for transp

tation over to Matson calls were made at Honolulu with passeng

and cargo to Hawaii obtaining the space unsold to the Far Ea t a

APL did not have a California Hawaii cargo tariff on file until 19

However APL maintained its own offices held itself out to the pub

issued its own tickets and bills of lading paid its own claims f

its own passenger tariff and carried passengers and cargoan in 

same manner as before and after the Agreement These acts sh

that APL held itself out as a common carrier between Califor

and Hawaii to the extent its space was not needed for transpac

trade and that it did carry passengers and cargo between Califor

and Hawaii

Matson also contends that APL failed to resume regular post w

service to Hawaii and that this amounted to avoluntary interrupt

of service within APL s control and therefore resulted in the ab

donment of its grandfather rights APL called at Hawaii w

only one of its first six post war passenger sailings which started 

May 1946 its first call at Honolulu was in December 1946 there 

a lapse of 45 days between this call and its second call in Febru

1947 and APL devoted the other five voyages to the urgent post w

needs of carrying displaced persons repatriates and other passeng

to the Far East We conclude that such an interruption in its ser

to Hawaii did not amount to an abandonment of any grandfath

rights which APL might have had

We find that APL or its predecessor in interest was in bona 

operation as a common carrier by water in the domestic coastw

trade in 1935 in its transpacific passenger and freight service betw

California and Hawaii and has so operated since that time exc

as to service overwhich APL or its predecessor had no control

We now look to see whether APL s proposed service is in subs

tial parity with that maintained by it in 1935 Referring to ta

I we find that APL proposes a passenger service for 1959 1962 w

the Oleveland Wi8on and Hoover and the carriage of some 2 

passengers on 40 one way voyages which is substantially less t

that provided in 1935 when it carried 2 852 passengers with se

vessels on 26 round voyages 52 one way voyages In1963 howe

when the Washington replaces the Hoover the proposed service c

templates the carriage of 5 959 passengers on 27 round voyages m

than double the number of passengers

APL claims a

right to grow with the trade Matson on the o

hand argues that the addition of the Hoover and the Washing

Such a tariff was also unfiled during th period before the Dollar Matson agree

and was apparently due to an oversight which was remedied as soon as Itwas discov

AliM
AMERICAN PRESIDENT LINES LTD HAWAU PASSENGER SERVICE 11

would exceed substantial parity with APL s 1935 operations and

contends APL s grandfather rights should be limited to the 1935

operations of the Ooolidge and Hoover and to the carriage of 1 782

passengers

Section 805 a was inserted in the Act to protect those com

panies already interested in the coastwise or intercoastal service

S Rept No 1721 74th Cong 2d Sess In disposing of the ques

tion of section 805 a grandfather rights we are guided by two

considerations 1 substantial parity must exist as between pro

posed and past operations for the protection of domestic operators

already interested in the trade and 2 the grandfather clause

cannot be so strictly read as to permit absolutely no flexibility in

equipment American President Lines Ltd Subsidy Route 17 4

F MB MA 488 502 1954 See alsoPacific Far East Line lnc

Sec 805 a Oalls at Hawaii 5 F MB MA 287 297 1957 This

principle is followed by us in contractual dealings with APL and

other subsidized operators and as recognized by APL under Article

1 2 e 7 and 11 15 of its subsidy contract we can reexamine and

impose limitations upon the operations of a subsidized operator in

the domestic trade

As indicated in table Iin 1935 with a seven ship operation APL

made 26 round voyages 52 ole way voyages and carried 2 852

passengers and 3 204 tons of cargo between California and Hawaii

It argues that the limitation on its grandfather rights is the

space left available upon completion of its transpacific bookings

This it says was the service offered in 1935 Although the burden

of proving grandfather rights rests on the party claiming such

rights applicant was unable to show the amount of salable space

available to passengers between California and Hawaii on voyages

in 1935 Substantial parity must exist as between proposed and

past operations American President Lines Ltd supra

We find that subject to a limit of 2 852 passengers and 3 204 LIT

of cargo a

year and not in excess of 26 round voyages the proposed

service of APL is in substantial parity with that maintained by it

or its predecessor in 1935

Table Ishows that during the period 1959 62 APL proposes to

make some 40 one way voyages between California and Hawaii carry

ing 2 119 passengers and about 2 456 tons of cargo During that

period service would be provided with the Wilson the Oleveland and

the Hoover The Wilson and Oleveland would make about 16 round

voyages ayear calling at Hawaii in both directions whilethe Hoover

owing to its slower speed would call at Hawaii on one leg only of its

6 F M B
round voyage In 1963 when the Washington takes the place o

Hoover APL proposes 54 one way voyages each year All t

vessels the Olevelalnd Wilson and Washington would call at Ha

in both directions for a total of 27 round voyages and it is estim

they would carry 5 959 passengers and 3 318 tons of cargo 

grandfather rights found herein appear to take care of A

proposed service during the period 1959 1962 The proposed se

in the period after 1962 when the Washington takes the place o

Hoover is in excess of APL s grandfather rights

In estimating the level of future travel APL s witnesses Joh

Child and P B Clover relied chiefly on studies made by Haw

Visitors Bureau HVB and or by Stanford University Res

Institute SRI These and other estimates projected to 1962 

1965 are as follows

TABLE II

Estimated travel between California and Hawaii during 1962 and 1965

1962

1 2 3 4 

Visitors to Westbound California Calif

Hawaii visitors Hawaii Haw

2 days 2 days travelers trave

andover and over sea and air by 

HVB

1 1955 estimate n n u 225 000 186 750 442 000

2 1958 estimate n n n n 325 000 270 000 638 000 1 

3 Clover estimate n uu n n n 576 000 1 

SRI

4 1955 estlmate u n n n u n UU

2 179 000 423 000

5

a 

6

1965

HVB

7 1955 estimate n n n

n U 280 000 232 400 548 000 1 

8 Child estimate n n m

om 415 000 780 000 1 

9 Clover

estimate

u n

un n 700800 000 1 175

SRI

10 1955

estimate

n

h nn n 215 000 508 000 1 

11

a

12 

1 Assumingsea travelers equal 25 percent of sea and air travelers shown in column 4

2

Interpolated

a Assuming sea travelers equal 32 percent of sea and air travelers shown in column 4 R

and intended residents excluded by SRI in 1965

Assuming sea travelers equal 20 percent of sea and air travelers shown in column 4

6 F M
AMERIICANI PRESIDENT LINES LrD HAWAIIPASSENGER SERV ICE 13

We agree with the examiner that there will be approximately

125 000 potential ocean passengers in 1962 and 150 000 in 1965 These

figures compare with vessel capacities as follows

TABLE III

Estimated travel CalifornialHa Jaii compared with vessel capacities

a b c

Capacity or vessels

Including Excluding

Leilani Leilani

1 Present 1 00 00 00 00 00 123 139 89 339 00

2 a Plus Hoover 00 00 00 00 123 299 89 499

3 b Plus Washington 00 00 00 127 139 93 339

4 Present Textron and Matson u u unuu u 123 520 89 720

5 a Plus1852 APLs g rights nm um n h uu 24 968 91 168

fl h Plus PL incl

Washington

uu oo h oo 126 627 92 827

Potential passengers

196200 00 00 00 00 0000000000 hh 125 000

1965 00 00 00

00 00 a 150 000

1 Lurline Matsonia MaOn freighters Oceanic Leilani Cleveland Wilson APLR W States PTL

We take official notice nnder Rule 18 gthat the Leilani was

withdrawn from service subsequent to the hearing Itwill be noted

that with the elimination ofthe Leilani the remaining vessel capacity

is far less than the projected surface passenger nlovement between

California and Hawaii for both 1962 and 1965 If atson s own

estimate of 93 593 surface passengers between California and Hawaii

in 1963 be accepted the demand for space will exceed the spaceoffered

Vessel capacity exclusive of the Leilani plus the proposed carryings

of the Washington would amount to only 93 339

On the basis of the foregoing we find that granting permission to

APL for its proposed service in 1963 and thereafter i e the carriage

of no more than 6 000 passengers and 3 320 LIT of cargo would not

on this record result in unfair competition to any person firm or

corporation operating exclusively in the coastwise or intercoastal

service

Since this record demonstrates that without the proposed carryings

of the Washington in 1963 and thereafter there would be insufficient

capacity to carry the potential surface passengers we find that the

proposed service would not be prejudicial to the objects and policy

of the Act

This report shall serve as written permission for the service involved

6 F M B
FEDF RAL MARITIME BOARD

No 807

ATLANTIC AND GULF PUERTO RICO GENERAL INCREASE IN RATES 

CHARGES 

Submitted December S 1959 Decided April 28 1960

Rates between North Atlantic and Gulf ports of the United States and Pu

Rico as increased 15 percent or 6 cents per cubic foot or 12 cents pe

pounds whichever produces the greater increase in revenue and as fu

increased 12 percent found just and reasonable

Odell Kominers Mark P Schlefer and Sterling F Stoudenm

Jr for respondents

Eduardo Garcia Walton HamiZton William D Rogers Abe Fo

Seymour Berdon and William L McGovern for Commonwealt

Puerto Rico John Regan for Administrator of General Serv

Mitchell J Oooper Frank M Oushman Vernon O Stonemam 

John B Street for Asociacion de Industriales de Puerto Rico Ma

facturers Association of Puerto Rico and Commonwealth Manu

turers Association ohn B Street Frank M Oushman and Ver

O Stoneman for Paula Shoe Company John B Street and Ve

O Stone7JWln for Caribe Shoe Corporation Mitohell J Oooper 

Frank M Oushman for Coastal Footwear Corp L Merrill Simp

for Bata Shoe Company Inc William M Requa for Associatio

Sugar Producers of Puerto Rico J W Harnach for Coopera

Grange League Federation Inc llarold Oopp for AtlanticInd

tries Inc T A Smith for Louisiana State Rice Milling Comp

Inc Wm M Reid for The Rice Millers Association Alan 

Wohlstetter for Trailer Marine Transportation Inc and Alfred 

estenbaum for Cigar Manufacturers Association of America 

interveners

Robert E Mitchell and Edward Aptaker as Public Counsel

14

6 F 
ATLANTIC OULF PUERTO RICO GENERAL RATE INCREASES 15

REPORT OF THE BOARD

CLARENCE G MORSE Ohairman and THos E STAKEN JR

Vwe Ohairman

By THE BOARD

On December 4 1956 United States Atlantic Gulf Puerto Rico

Conference the Conference then comprised of Bull Insular Line

Inc Lykes Bros Steamship Co Inc Waterman Steamship Corpora

tion and Alcoa Steamship Company Inc Bull Lykes Waterman

and Alcoa filed with the Board Tariffs FMB F No 14 Homeward

Freight Tariff No 7 and FMB F No 13 Outward Freight Tariff

No 7 naming increases in commodity rates over the applicable rates

then in effect to become effective January 5 1957 between United

States Atlantic and Gulf of Mexico ports and ports in Puerto

Rico

On December 20 1956 J W de Bruycker agent for the Conference

filed special permission application to modify on short notice the

increases in rates to reflect an adjustment not in excess of 15 percent

or 6 cents per cubic foot or 12 cents per 100 pounds whichever pro

duces the greater increase in revenue over the applicable rates then

in effect This increase will be referred to as the 15 percent increase

On January 4 1957 pursuant to section 18 of the Shipping Act

1916 as amended 46 U S C 817 the 1916 Act and the Intercoastal

Shipping Act 1933 as amended 46 U S C 843 et seg the 1933

Act we ordered an investigation jnto the reasonableness and lawful

ness ofthe rates charges regulations and practices stated in the tariff

scheduleS filed December 4 1956 and ordered the operation of these

schedules suspended until midnight January 8 1957 unless other

wise ordered On January 8 1957 we amended our order ofJanuary

4 1975 and granted special permission to publish the rate increases

as modified to be effective not earlier than January 9 1957 on one

day s notice We also ordered an investigation of the 15 percent

increase and directed a that the carriers keep an account of all

freight moneys received by reason of the rate increases for the period

commencingJanuary 9 1957 and terminating May 5 1957 and b

that the carriers upon final determination by the Board pay to ship

pers out ofthe carriers general funds the sums if any to which the

respective persons who pay the freight might be entitled The 15

percent increase became effective on January 10 1957

The orders ofJanuary 4 and January 8 1957 made the Conference

agent de Bruycker Bull Lykes Waterman and Alcoa respondents

Notice of investigation and hearing was published in the Federal

Register of January 17 1957 22 FR 355 and hearing was held

6 F MB
16 FEDERAL MARITIME BOARD

in New York N Y April 16 through May 3 1957 After he

on the 15 percent increase but before briefs were due respond

published on July 18 1957 a 12 percent additional general rat

crease the 12 percent increase to become effective Sept mbe

1957 On August 14 1957 Pan Atlantic Steamship Corpor

Pan Atlantic an affiliate ofWaterman filed revisions to its H

ward Tariff No 1 FMB F No 1 to become effective Septembe

1957 naming local commodity rates from Puerto Rico to Un

States Atlantic ports based on the sam pat rn as the confe

rates

By supplementaJ order of September 5 1957 we a expande

ploceeding to include an investigation into the lawfulness o

rates as further increased by 12 percent b suspended the oper

of the conference and Pan Atlantic schedules naming the 12 pe

increase untilJanuary 14 1958 c made Pan Atlantic a

respond

and d ordered a further hearing Notice of the expanded inv

gation and further hearing was published in the Federal Reg

of September 12 1957 22 F R 7291 and further hearing was 

in New York from October 21 through 28 1957 and conclude

Washington D C November 1 1957 The 12 percent inc as

ame effective on January 15 1958

During the course of thehearings the examiner denied reques

interveners that respondents be required to produce or make 

underlying books records and accounts for the purpose of c

examination in order to test the accuracy of certain of respond

exhibits in the form of financial and statistical summaries based 

allocations and computations derived from underlying docum

Inan initial decision served February 3 1958 the examiner consid

those exhibits as reliable probative and substantial based o

sworn testimony of the witnesses through whom they were introd

as to their correctness and accuracy

After oral argument upon exceptions to the initial decision 

order entered June 13 1958 we overruled the examiner as to 

issues and stated 5 F MB 426 429 430

We do not agree with the examiner that the summary evidence present

respondents without reasonable access to supporting and underlying 

records and accounts by which the accuracy and suffiCiency of the evidence 

be tested is reliable probative and substantial evidence as require

section 7 c of the Administrativ ProeedUTe Act The record is insuf

for the Board to make proper findings as to the lawfulness of the rates 

section 18 of the 1916 Act and underthe1933 Act

We conclude that this proceeding should be remanded to the examin

further hearing and inorder that thefull record herein shall contain pro

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 17

and substantial evidence sufficient for the Board to make valid determinations

as to the lawfulness of the rates under investigation respondents should pro

duce at such further hearing or make available to interveners and Public

Counsel such original and underlying books records accounts and worksheets

including corporate profit and loss statements and balance sheets as arerequired

to determine theprobative value of the evidence the accuracy of computations

and allocations between regulated and nonregulated activities and the scope

and accuracy of intercorporate transactions Further there should be full

disclosure of data with respect to any sales or transfers of corporate assets

which would be relevant and material

in determining accurately the fair value

of properties and assets devoted to this Puerto Rican service

The proceeding was remanded to the examiner for the purpose of

receiving further evidence Further hearings were held during the

period October 6 to 28 1958 Interveners in opposition to the rate

increases or as their interests may appear were the Commonwealth

of Puerto Rico the Commonwealth the Administrator of General

Services Asociacion de Industriales de Puerto Rico Manufacturers

Association of Puerto Rico Commonwealth l1anufacturer Associ

ation Paula Shoe Company Caribe Shoe Corporation Coastal Foot

wear Corp Bata Shoe Company Inc Association of Sugar Pro

ducers of Puerto Rico Cooperative Grange League Federation Inc

Atlantic Industries Inc Louisiana State Rice Milling Company

Inc The Rice Millers Associa ion Trailer Marine Transportation

Inc and Cigar Manufacturers Association ofAmerica Inc

In his initial decision on further hearing the examiner found and

concluded that the 15 percent and 12 percent increases under investi

gation were just and reasonable and that the proceeding should

be discontinued Exceptions to the initial decision and replies

thereto were filed and oral argument was heard Exceptions and

proposed findings not discussed in this report nor reflected in our

findings have been considered and found not justified by the facts or

not related to material issues in this proceeding

CARRIER RESPONDENTS

1 Alcoa Alcoa offers weekly service from New York and Balti

more

Md and weekly service from Mobile Ma and New Orleans

La to Puerto Rico Each sailing serves all ports in uerto Rico

The vessels in the North Atla ntic service after discharge at Puerto

Rico ports proceed into other trades generally contract services

In the Gulf service the vessels return from Puerto Rico to the Gulf

ports a service inaugurated in March 1958

2 During 1956 1957 and the first six months of 1958 average

vessel utilization ona cubic basis by Alcoa in the North Atlantic

service ranged from 39 5 percent in the second quarter of 1956 to

6 F M B
18 FEDERAL MARITIME BOARD

84 3 percent in the fourth quarter of 1957 and in the Gulf se

from 44 percent in the second quarter of 1956 to 66 6 percent in 

second quarter of 1957 The average southbound voyage in 

from the North Atlantic consumed 14 5 days and from the Gulf 

days

3 Bull Bull provides three sailings per week from North 

lantic ports to Puerto Rico One sailing proCeeds from Baltim

and Philadelphia Pa to Puerto Rico and return Another sa

proceeds from New York to Puerto Rico and return the Thurs

sailing and the third from New York to Puerto Rico thenc

the Dominican Repuhlic and return the Friday sailing Basic

the services are provided with six 02 type vessels operated 

strict two week turnaround In addition Liberty type vessels 

are employed to lift stators generators ammunition and other 

cialized cargo destined to Puerto Rico which cannot be handled on 

regular 02 vessels Liberty ships also have been utilized in some 

stances to carry fullcargoes of bagged raw sugar under the tariff 

this movement declined rapidly in 1957 due to conversion of the 

sugar movement to bulk movement under contract and has s

come to avirtual halt Caribbean Dispatch Inc an affiliate of B

is a major contract carrierofbulk sugar

4 In n transaction closed December 18 1956 characterized in 

brief for the Conference as an irrefragibly sic arm s

len

transaction between completely unrelated interests Olympia 

poration incorporated in Delaware acquired substantially all o

stock of A H Bull Steamship Co a New Jersey corporation A 

Bull New Jersey Prior to the transaction the purchaser and 

sellers had no stockholders directors or other interests in comm

or any similar relationship Olympia had been organized by 

parent American Coal Shipping Inc ACS which paid 100 

for all of Olympia s outstanding stock as the instrument desig

to facilitate the consummation of the transaction ACS and its 

stockholders also loaned to Olympia about 5 million at inte

of 5 percent Between December 18 1956 and J anuaI Y 21 1

Olympia s name was changed to A H Bull Steamship Co A 

Bull Delaware The transaction contemplated purchase by Olym

of all of the outstanding stock of A H Bull New Jersey for a t

consideration of 40 million which was not finally accomplis

until February 28 1957 the liquidation of A H Bull New Jer

and the transfer ofall ofits assets toA H BullDelaware

5 On December 18 1956 A H Bull New Jersey had over 

million in cash obtained from mrplus liquidation of quick as

representing in part depreciation funds release of vessel replacem

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 19

funds and receipt of the repayments of advances and dividends

from subsidiary companies among others On the closing date of

the stock purchase this 18 million was declared by A H Bull New

Jersey as a dividend paid principally to Olympia and the remainder

of the purchase price of 40 million was met from the proceeds of

the loans from ACS and its stoekholders of the 5 million mentioned

above and bank loans of same 17 million at interest rates ranging

from 4 to 5 percent guaranteed by ACS

6 The net purchase price paid by Olympia for A H Bull New

Jersey was therefore about 22 million The book net worth of

A H Bull New Jersey at the time of closing was about 12 330 000

Incident to the purchase the physical assets of A H Bull New

Jersey and its subsidiaries had been independently appraised About

January 21 195 7 in partial but almost complete liquidation ofA H

Bull New Jersey its assets were transferred to the books of A H

Bull Delaware and in the process the vessel book values were raised

from 5 160 421 85 to 12 892 610 21 effective as of the closing date

the latter figure representing about 70 percent ofthe appraised values

of the vessels The ascribed values of certain other assets were

changed also for consolidated statement purposes but on the cor

porate books only the vessel values were changed Thus on the

books of A H Bull Delaware the vessel book values are carried

presently at amounts less accrued depreciation since the closing date

representing a pro rata share of the total purchase price paid by A

H Bull Delaware for the assets ofA H Bull New Jersey

7 Corporate entities affiliated with Bull so far as is here pertinent

include A H Bull Delaware of which Bull is a

subsidiary A H

Bull Co which provides continental United States overhead serv

ices for Bull and others in the corporate family in return for manage

ment and operating cOlnmissions composed principally of a percent

age of revenues and a per diem husbanding cha rge several separate

corporations which own and operate pier facilities in Puerto Rico

Caribbean Dispatch Inc mentioned above and Daftan Realty Co

owner of office facilities in New York utilized by Bull

8 For 65 days between August 19 and October 22 1957 Bull s

operations wereimmobilized by a strike arising out of a

jurisdictional

dispute between seafaring unions The strike was not unrelated to

the fact that ACS the new owner of the Bull properties was in part

owned by the United Mine Workers Other strikes which have

affected the operations of Bull at various ports for varying reasons

and for periods of time ranging from 2 to 44 days totaled 33 days

in 1951 1952 and 1956 12 days in 1953 101 days in 1954 78 days in

6 F M B

732 047 0 64 3
20 FEDERAL MARITIME BOARD

1955 14 days in February 1957 and 20 days in the first 6 mont

of 1958

9

Lykes Lykes operates its weekly service between the G

ports of Lake Charles La and Houston and Galveston Tex a

occasionally other western Gulf ports and Puerto Rico as a p

of its subsidized service on Trade Route No 19 Line A servic

between Gulf ports ofthe United States and Cuba Haiti theDomi

can Republic Venezuela Colombia and Panama No voyages a

operated to or from Puerto Rico exclusively The number of ves

days operated by Lykes in the Puerto Rican portion of its Line 

service is less than that in the service to and from foreign po

During 1956 1957 and the first 6 months of 1958 average ves

utilization on a cubic basis achieved in the combination Puerto Ric

service ranged from 66 6 percent in the fourth quarter of 1957 to 9

percent in the first quarter of1957

10 Wate1 1lWn Waterman is a subsidiary of McLean Industri

Inc At the outset of this proceeding it operated a weekly serv

between New Orleans and Mobile and Puerto Rico utilizing t

vessels on a 14 day turnaround with additional vessels for re

purposes and when extra cargo demanded Beginning in Octo

1957 Waterman also inaugurated weekly sailings utilizing two v

sels on a 14 day turnaround in regular break bulk service betwe

New York Baltimore and Puerto Rico Waterman intended to p

videa permanent North Atlantic Puerto Rico service at first w

regular break bulk vessels and later converting to trailership servi

11 Effective February 4 1958 Waterman withdrew from 

Conference and simultaneously ceased all operations in the Pue

Rican trades which were taken over without break in service 

Waterman Steamship Corporation of Puerto Rico Waterman P R

The latter is a wholly owned subsidiary of Waterman is not a 

spondent and is not a member of the Conference although its ra

are in all respects the same as those ofthe Conference When fil

its initial tariffs with the Board and in subsequent pleadings here

Waterman P R has agreed to be bound by the results of thisproce

ing so far as its rates are concerned Statistical and financial d

reflecting the combined Waterman and Waterman P R operatio

are of record although no recent data were presented forecast

operating results for the entire year 1958 as was the case with 

other Conference respondents

12 On February 28 1958 Vaterman P R inaugurated its No

Atlantic Puerto Rico trailership service with the sailing of 

Bienville This vessel upon arrival in Puerto Rico was preven

from discharging hecause of labor difficulties After some de

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 21

the Bienville proceeded to New Orleans where her cargo was dis

charged and that which had not spoiled was transferred to a ship

regularly employed in the Waterman P R Gulf Puerto Rico break

bulk service The voyage consumed 34 days in all After this

experience Waterman P R discontinued its North Atlantic Puerto

Rico service which has not since been resumed either on a break

bulk or trailership basis

13 Pan Atlantia Pan Atlantic is an affiliate of Waterman and

as such was required to maintain the same rates as the Conference

by the terms of the conference agreement to which Waterman was

a party Between April 1957 and early 1958 Pan Atlantic pro

vided a northbound service from Puerto Rico to Miami and

Jacksonville Fla in conjunction with its intercoastal and west

coast Puerto Rico services which was suspended at the end Of this

period and has not been resumed The tariff under whicih such

service was operated was canceled effective August 22 1958 As

far as the record discloses this service was minimal since the c

go

carried averaged only 51 tons per voyage with gross revenue per

voyage of 1 506 These data are so insignificant as to warrant their

exclusion from consideration herein although the rates under in

vestigation willremain subj act tothe findings

14 Pan Atlantic instituted a

trailership service between New

York and Puerto Rico on July 30 1958 which is presently being

operated On October 27 1958 we denied a petition by the Con

fere ce requesting that this investigation be broadened by naming

Waterman P R as a respondent and bringing in issue the current

tariffs ofPan Atlanticand Waterman P R

PUERTO RICAN ECONOMY AND THE TRADE

15 Puerto Rico is a small island 100 miles long and 25 miles wide

separated from the nearest point in the United States by over 1 000

miles of open water The economy of the island has never been

self sustaining and it has few natural resources It is one of the

most densely populated areas of the world Its external trade is

almost entirely with the United States About 40 percent of all

goods produced and about 54 percent of all goods consumed by its

people are destined to roriginate in the United States Average

income per capita in i954 was 446 as compared with 1 770 in the

United States The percentage of the labor force of unemployed

or only partial employed has consistently exceeded that in the United

States These data indicate that increases in the cost of shipping

F M B
22 FEDERAL MARITIME BOARD

such as are here involved affect the economy of Puerto Rico 

the living standards of its populace more sharply than would sim

increases elsewhere in thenation

16 The conference rates in the Puerto Rican trade are determi

by three fourths majority vote of the members Therefore no 

carrier can dominate the making ofrates Waterman P R prese

operating in the Gulf Puerto Rico trade is not a member of 

Conference and its rates can be made by individual action sub

only to the competitive impact of the rates maintained by the C

ference As is indicated by the statistics shown in table I Bu

the dominant carrier in the trade receiving approximately 50 p

cent of the revenues even in the year 1957 when its operations w

immobilized for morethan 65 days

TABLE I Gross transportaticm reve1lIUes of respo ndents

Carrier 1956 1957 First ha

BulL n u n n n 24 993 850 21 646 383 11 6

Waterman u n n 6 534 389 9 416 267 4 6

Alcoa n n 6 244 864 9 175 949 4 2

Lykes n u

u a 843 368 3 774 843 1 9

Totals onuu n n n

n u 41 616 471 44 013 342 22 4

17 The most recent traffic and revenue projections of the resp

ents where given were based on an extension of their most re

experience the first half of 1958 subject to adjustments for kn

or contracted cost increases Although there is testimony to the e

that a gradual increase may be expected in the movement of gen

cargo between Puerto Rico and the mainland the statistics disc

a decline in volume carried of cargo subject to thetariffs here invol

This decline is attributed in large part to the conversion of the 

sugar movement from bag under the tariffs to bulk under cont

and to the construction of a fertilizer plant in Puerto Rico w

virtually eliminated the movement of prepared fertilizer and 

stituted therefor the movement of fertilizer raw materials in tra

vessels Table IIshows the cargo data submitted for the years 1

57 and the first half of 1958 and the projections for the full 

1958 where given Weight tons are computed on the basis o

weight of the cargo carried and freight payable tons on the bas

which the freight charges were paid either weight or measurem

The data for the fullyear 1957 in tables Iand IIreflect the impa

the long strike in that year against Bull and the consequent diver

to Alcoa and other carriers of substantial amounts oftraffic norm

carried by it They show the dominant position of Bull in the tr

6 FY 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 23

TABLE n Cargo carried infreight payable tons eaJcept whereindicated

First half

Carrier 1955 1956 1957 1958

projected

1957 1958

BulL h hh h I 876 964 1 828 275 1 151 993 710 877 558 880 1 117 760

Alcoa 00 429 470 312 701 418 509 186 422 169 363 340 000

Waterman 239 535 238 895 298 831 148 526 132 202

Lykes n h h

mj 26Z 389

203 438

jiOZ S2Z

107 822 215 644

Lykes hnU

n n

1 245 334 1 186 220 1 102 918 1 205 836

1 Weight tons

18 Taking into consideration the factors mentioned in paragraph

17 above and the entry into the trade of Pan Atlantic with its new

and attractive trailership service which no doubt will succeed in

diverting some traffic from the services maintained by the other re

spondents it is found that the projections of the respondents as to

the year 1958 are reasonable

SPECIFIC COMMODITY RATES

19 In the first initial decision the examiner found as follows

60 The shipper interveners generally are those who ship commodities under

socalled promotional rates These rates have been maintained by the car

riers prior to the proposed increases at comparatively low levels designed to

promote the movement of the commodities so rated The promotional rates

apply primarily to northbound traffic and most of them have been used since

1946 in cooperation with and at the request of the newly developing industries

in Puerto Rico This traffic in gross tons in 1955 amounted to approximately

20 000 tons northbound and 1000 tons southbound In 1956 it amounted to

approximately 25000 tons northbound and 2000 tons southbound The revenue

from this traffic inrelation to total revenue was perhaps less than lh of 1 percent

61 Selected commodities from those transported at promotional rates stated

by the earners to be typical were northbound shoes paperboard chinaware

coffee Cigars rugs artificial flowers boxes kd scrap metal scrap tobacco and

confectionary and southbound tin cans iron and steel articles glass jars

bottles n o s paper and paper products and tiles Two shippers understood

to be representative of shippers of such comnlOdities testified at the first hear

ing One was a shipper of candy and the other of shoes both shipping from

Puerto Rico to the United States mainland Their main objections were that

the first rate increases on the commodities were greater than 15 percent This

is so because of the 6 cents per cubic foot or 12 cents per 100 pounds aspect of

the first increase

62 The shippers gave important consideration to the relatively low shipping

rates for their products it is stated in their decisions to establish business

in Puerto Rico since transportation charges are vital factors in their business

prospects The record shows that the 15 percent rate increase raised footwear

costs 1 13 percent of the value of the product and candy 1 78 percent These

increases it is stated seriously limit the possibilities of expanding mainland

business and discourage people from establishing business in Puerto Rico

6 F M B
24 FEDERAL MARITIME BOARD

63 The record shows that the promotional rates are too low and appea

be noncompensatory even with the 15 percent increase and there is some q

tion as to whether the further 12 percent increase renders said promotio

rates compensatory

20 No exceptions were taken to the above findings They 

borne out by the record and no additional evidence was presented 

the second hearing relating to these issues We adopt such findin

COST INCREASES

21 The cunlulative rate increases under investigation aggreg

about 29 percent The last prior general rate increase in the Pue

Rican trade was made effective November 12 1951 Since that d

the expenses of respondents have increased substantially For 

ample Bull shows that stevedoring wages in the United States h

increased 46 percent and in Puerto Rico about 63 percent fuel 

costs have increased 23 percent vessel operating costs as a whole 

percent crew wages 62 percent vessel repair costs 50 percent 

insurance 52 percent Comparable cost increases are shown for 

other three carriers in the trade

22 There is evidence that the carriers through increased efficie

of operations have endeavored to minimize the impact of the sta

cost increases Stevedoring expenses account for a substantial p

portion of total operating expenses Bull shows that from 1951 

the end of 1957 loading costs in N ew York increased from 4 06 

ton to 4 69 per ton and discharge costs at the same port from 4 

per ton to 5 74 per ton increases of 15 5 percent and 19 6 perce

respectively far lower than the wage increases shown This favora

result is attributed to increased efficiency in loading and discha

ing operations theleasing ofmodern improved terminal facilities 

in some degree the use of containers and vans Loading and 

charge costs at San Juan P R however reflect more closely 

wage increases attributed to the lesser efficiency ofport arrangeme

and labor Loading costs at that port in the same period increa

from 2 02 to 3 07 per ton and discharge costs from 2 79 to 

per ton increases of 52 percent and 68 8 percent respectively

23 Waterman shows in addition to the cost increases stated ab

that effective in October 1958 longshore wage increases at Pu

Rican ports will after that date increase stevedoring expenses 

about 92 cents per ton and that known prospective wage increa

will by the end of1958 increase crew wage costs by 160 000 annu

overthe wage levels for 1957

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 25

ALLOCATION METHODS

24 Of the principal respondents Waterman is the only one which

operates an exclusive uerto Rican service The remaining respond

ents as shown in paragraphs 1 9 above Operate their services to and

from Puerto Rico either wholly or partially on a

joint basis with

other services This has necessitated allocation of the joint service

expenses ofthe respondents and ofthe assets devoted to these services

so as to ascertain as nearly as possible the proper apportionment of

of expenses and assets between the regulated and nonregulated trades

in order to determine the adequacy of revenue in the regulated trade

For this purpose respondents have made their allocations principally

on ton mile prorate formulae

25 Where possible such as in the case of port and cargo handling

expenses incurred in Puerto Rico the expenses were directly assigned

Most other expenses including vessel operating expenses cargo and

port expenses in the United States vessel depreciation and overhead

were subject to allocation The need for allocation does not alter the

basic factors contributing to vessel operating expenses the volume

and the distance carried In applying the ton mile prorate the re

spondents used the traight line distances between ports of loading

and discharge since a vessel sailing toward Puerto Rico is also sail

ing toward foreign ports of call Vessel operating expenses and

certain other expenses were then allocated to the Puerto Rican serv

ice in the proportion that Puerto Rican ton miles bore to total ton

miles operated in the joint services

26 Where the ton mile prorate involved too heavy burden as

where the allocation was between the Puerto Rican trade and the en

tire company operation a revenue prorate was used for convenience

using as factors the proportion that Puerto Rican revenue bore to

total revenue Inthe case of loading costs distance is not a relevant

factor and allocations were generally made on thebasis of the number

of tons handled In the case of Bull s substantially equidistant

Puerto Rican and Dominican destinations its use of a ton mile pro

rate in the allocation of loading and stevedoring costs in the United

States resulted in an approximately equal allocation of loading ex

pense per ton

27 Strike expenses incurred by Bull in 1957 were aUocated by it

on the basis of a revenue prorate because the development 0fa ton

mile formula would have made necessary a port to port analysis

of volume and distances for a minimum of 155 sailings a burden

6 FM B
26 FEDERAL MARITIME BOARD

some task Since the Dominican revenue is substantially hig

per ton thMl Puerto Rican revenue for approximately the sa

distMlce as shown below this aetually allocated a higher proport

of strike expenses to the Dominican traffic and a lawer proport

to Puerto Rican traffic than would have resulted fram the use o

ton mile prorate

28 Vessel assets were assigned to the Puerto Rican services of 

respondents on the proportion of the vessel operating days in th

services allacated where necessary on the basis of a ton mile prora

Assets in Puerto Rico were direetly assigned to the Puerto Ri

service and terminal property in the United States was gener

allocated on a revenue prorate

29 At the request Of other parties respondents in most instan

also computed their expenses onthe basis ofrevenue prorate formu

Interveners contend that far the purposes of this proceeding reve

prarate allocations shauld be used For example the Camm

wealth argues that segregation of the joint vayage results an 

Friday sailings of Bull gave inordately excessive profits to 

Dominica n portion and exceptianally large lasses to the Pue

Rican portiOn in 1957 as to which on a ton mile prarate Bull sh

a combined net revenue on the joint sailings after depreeiation 

overhead but before taxes af 46 345 with allocation of a loss 

244 973 to the Puerto Rican partion and a profit of 291 318 

the Dominican portion

30 In 1957 total traffic carried by Bull on the jaint vayages 

311 699 tons of which 36 784 tons were DaminicMl ca rgo In 

same year tatal joint vayage freight revenue was 5 367 625 of wh

Dominican revenue was 924 140 The Commonwealth character

as anomalaus the results of the ton mile prorate whioh attribu

to the Dominican trade net revenue equal to 30 percent of e

dallar af revenue Bull s revenue per tan in the Daminican trad

1957 was 36 percent higher than in the PuertO Rican trade 2

as aginst 19 94 and costs of discharge in the same year in 

Dominican Republic were anly 22 5 percent of like costs in Pu

Rica 106 as against 4 71 These data indicate that the p

results derived through use of tan mile prorate farmulae reflect w

a reasanable degree of accuracy the inherent differences as betw

the Dominican and Puerto Rican trades The Commonwealth 

argues that the use of the ton mile prorate results in somew

higher unit casts an the joint service voyages than on the Thurs

sailings of BuU which serve Puerto Rico only ThBse results 

fully explained by the facts that there were more sailings in 1

in the jaint service with about the same amaunt af tatal traffic 

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RAT INCREASES 27 

consequently lower volume per voyage and higher costs per ton and

also that the joint voyages were subject to overtime costs because

oflate sailings not inourred onthe hursday sailings

31 Manufacturers Association of Puerto Rico contends that

allocation af expenses for the Friday jaint service sailings of Bull

should be made on a so called known cost per ton method By

this method allowable expenses on the j

oint service voyages would

be canfined to the unit costs incurred on the Thursday sailings which

serve Puerto Rico exclusively which costs can be computed without

the necessity far allocations Such a method bears nO relation to

the realities ofthesituation undis clearly erroneous

32 The Commonwealth alternatively suggests that in lieu of al

locatian in the case of Bull s Friday sailings the total profit results

on the jOint voyages shOuld be included on the grounds that the

Dominican operatiOn is a by product of the Puerto RiCctn trade

which could not stand on its own feet that anly 13 percent of the

cargO on the jaint vayages is Dominican that Dominican cargo is

less than one huH of one percent af the total Bull PuertO Rico traffic

and that the carrier itself recognizes the incidental nature af the

Dominiean operations by faiLng to alloea te aut of its asset state

ments any portion 0f vessel and ather property values attributable

to the Dominican aperation The issue here is not the profit accruing

to Bull as a result of its joint service operations but the justness

and reasanableness af the rates under investigation which in the

nature af the case must be decided on the basis of the adequacy af

the revenues derived therefrom There is nO suggestion that alloca

tion is not necessary in the case of the other respondents which

O perate jaint services and nO gaod reasan appears why Bun shauld

be accorded special trea tment in this respect The authorities cited

clearly support agency action in general rate proceedings in adopting

apprOpriate means af effectuating a separatiOn af the regulated and

nOnregulated portiOns of an integrated enterprise See Oities Serv

ice Gas 00 v Federal P01 er Oom n 155 F 2d 694 704 5 1946

cert den 329 U S 773 and Colorado Interstate Co v Comm n 324

U S 581 586 92 1945 The record clearly indicates that dissimilar

rates and cost factars as betwee n the Puerto Rican and Daminican

aperatians make allocation necessary in arder to avoid distortian

of the operating results in the PuertO Rican trade and the use of

the resulting data in assessing the lawfulness of the rates under

the jurisdiction ofthe Board
28 FEDERAL MARITIME BOARD

utilized and the other allocation methods adoped by the responde

are reasonableand proper for thepurposes ofthisproceeding 

DEPRECIATION AND BULL s VESSEL BOOK VALUES

34 In general the vessel book values maintained by responde

represent the cost of acquisition plus additions and betterments 

preciated on the basis of a 20 year vessel life down to a residual sc

value amounting to 2 5 percent ofacquisition cost In the discuss

immediately to follow vessel acquisition costs and book values 

stated as approximations since precision is not necessary for dis

sition ofthe issueshere raised and since precise data after allocatio

are shown inf la

35 Alcoa s C 1 vessels utilized in its Gulf service were acqui

in 1941 and 1942 at costs ranging from 1 000 000 to 1 250 000 and 

December 31 1956 had been depreciated down to net book val

ranging from 223 000 to 322 000 Its C 2 vessels used in the No

Atlantic service were acquired in 1946 and 1947 for 1 200 000 

1 333 000 and by the same date had been depreciated down to 535 

to 635 000

36 Waterman s C 2 vessels used in its Gulf service were acquired 

1947 and1948 for 984 000 to 1 100 000 andby December 31 1956 h

been depreciated down to about 500 000 Lykes C l vessels w

acquired between 1943 and 1949 for 943 000 to 1 000 000 and by 

same date hdbeen depreciated down to slightly less than 50 percent 

original cost

37 In the case of Bull most of the C 2 vessels had been acquired 

1947 at costs of 948 000 to 1 006 000 by A H Bull New Jersey a

by December 18 1956 had been depreciated down to about 750 0

Two ofthe C 2 vessels were acquired in 1954 by A H Bull New Jers

in exchange for fully depreciated Liberty vessels and modest amou

of cash and entered on the books at about 208 000 and 248 0

These two C 2 s by December 18 1956 had been depreciated down 

about 173 000 and 203 000 Annual depreciation charges in 19

iftaken by A H Bull Delaware on thebasis of the vessel book valu

maintained on the books of A IL Bull New Jersey on the portion 

the fleet allocated to the Puerto Rican trade would have amounted 

396 887

38 As of December 18 1956 and as a result of the transaction d

ailed in paragraphs 46 above the 02 vessels utilized by Bull in 

Puerto Rican services wereentered on the books of A H Bull De

ware at acquisition costs of about 853 000 to 979 000 representin

as there stated about 70 percent of their then appraised values As 

6 F M B
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 29

result depreciation charges claimed by Bull in 1957 and actually taken

on the booksofA H Bull Dela vare amounted to 929 514 or 532 627

more than would have been claimed by A H Bull New Jersey in the

event the transaction had not taken place Similarly the increased

depreciationtaken in the first six months or 1958 amounted to 364 540

as against 194 456 hadthe transaction not occurred

39 Domestic market value for C 2 vessels exclusive of extras in

Apri11957 is shown in the record as 1 350 000 which by October 1958

had declined to 875 000 The earlier value reflects the high market

values which were the result or the Suez Canal crisis which created a

sudden shortage in available vessels The later value reflects the

decline in vessel market values resulting from the depression in the

shipping industry which occurred between the dates given For C l

vessels exclusive of extras the domestic market value in April 1957

was 1 100 000 which declined by October 1958 to 575 000

40 The Commonwealth contends that with respect to depreciation

generally respondents vessels have already been depreciated below

realistic economic residual values as reflected by the market values

shown that residual values based on nominal scrap value are un

realistic and do not represent an accurate measure of the actual resiJ

dual value ofthe vessels which can be presumed to have a service life

of more than 20 years and will at the expiration of that time either

be sold or traded in at prices much higher than scrap value that the

residual service value of the vessels is at least equal to their book

values at the end of 1955 and that as a

consequence depreciation

charges taken by respondents should be disallowed in their entirety

as an item of expense in determining the results of respondents

operations in the Puerto Rican trade

41 The depreciation practices of respondents and the estimated

residual value are recognized for tax purposes and are in conformity

with the Board s General Order 24 46 CFR sec 284 2 f Con

trary to the contention of the Commonwealth this record affords no

basis for conjecture as to the possible residual value of the vessels

Gtilized in the Puerto Rican trade other than the traditional and

long accepted residual value used by respondents To adopt the

suggestion of the Commonwealth would substitute speculation for

certainty since depreciation charges allowed would fluctuate with

varying judgments as to possible future residual values which may

be affected by unforeseen circumstances We reject the contention

ofthe Commonwealth

42 Public Counsel and interveners also contend that for the pur

poses of this proceeding the depreciation charges claimed by Bull
30 FEDE RAL MARITIME BOARD

on the basis of vessel acquisition costs entered on the books of A 

Bull Dela ware must be disallowed depreciation allowed only on 

book values maintained prior to the ACS transaction by A H B

New Jersey and vessel book values determined on the basis of proj

tions of the books of A IIBull New Jersey The arguments 

based in the main on the rule propounded by the Supreme Co

particularly with regard to public utilities such as power and lig

and telephone companies that the proper guide to book value o

utility s property is the cost as of the time when the property to 

valued was first acquired by a public utility ordedicated to the pu

use See A T T 00 v United States 299 U S 232 239 19

and cases there cited That case upon analysis is also autho

pp 240 4 for the proposition that acquisition cost of the last ow

in a bona fide arnls

length transaction properly may be entered 

the books of the acquiring utility and is the proper depreciation b

43 There is no suggestion here that the ACS purchase was a

thing other than an arm s length transaction between unrelated 

terests that there was any attempt at collusion so as to arbitra

inflate the values of the Bull properties or that the purchase 

an improvident one In fact based upon vessel market values sho

in the record the Bull assets were acquired at bargain prices and 

vessel acquisition costs entered upon the books of A H Bull D

warerepresent the true acquisition costs incurred by that corporat

The Board has no jurisdiction over financial transactions involv

carriers such as are here involved and the decision here must be ba

on the facts as they exist

44 It is found that the depreciation charges claimed as expe

by respondents including those claimed by Bull on the basis of ve

acquisition costs incurred by A H Bull Delaware are reasonable 

proper for the purposes of this proceeding and that the vessel b

values maintained by A H Bull Delaware reflect the true acquis

costs of the vessels utilized by Bull in its Puerto Rican services

VALUATION AND RATE BASES

45 Gene1 al The Conference advocates rate bases calculated a

June 30 1958 notwithstanding that the first increase here invo

became effective in January 1957 iVaterman individually cont

for rate bases compiled as of December 31 1957 Public Counsel 

Manufacturers Association of Puerto Rico contend that rate b

should be constructed as of December 31 1957 applicable to the 

rate increase and as of tTune 30 1958 applicable to the 1958 

6 F

M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 31

increase The Commonwealth assigns values based on a composite

analysis of the totality ofthe exhibits submitted In General Increase

in Iial Oaiian Rates 5 F MB 347 3545 1957 we stated that carriers

are entitled to a fair return on the reasonable value of the property

at the time that it is being used for the public and that in ascertaining

the reasonable value we are not bound by any artificial rules or

formulae citing San Diego Land Oompany v NationalOity 174 U S

739 1899 and The Jtlinnesota Rate Oases 230 U S 352 1913

46 This proceeding involves two separate rate increases the second

superimposed upon the first ThE record includes data concerning

the actual operations of respondents for almost a full year under the

first of these increases and for almost six months under the combined

increases In the usual rate increase case determination of the

lawfulness of the increases proposed is necessarily predicated npon

projections of revenues and expenses expected in the future and the

property valnes for the purpose of calculating the expected rate of

return are most readily determinable as of the time the rate increases

are proposed IIere hmvever particularly with regard to the 15

percent increase the results of operations under the increased rates

can be ascertained with some degree of certainty The most precise

method of resolving the issues presented by this proceeding would

be to determine average values of respondents property employed

during 1957 applying operating results for the year 1957 to the result

ing figures to determine rates of return actually earned during that

year and then to ascertain values as of December 31 1957 applying

projected operating results for the year 1958 based upon actual

operations during the first six months of that year to the ascertained

values as of December 31 1957 the approximate date when the 12

percent increase became effective so as to compute expected rates of

return for the year 1958 Such extreme precision is not required

however and it is doubtful that the different values arrived at would

be substantially at variance with each other For the purposes ofthis

proceeding therefore property values will be determined as of De

cember 31 1957 and the resulting rate bases applied to the actual

operating results so far as they can be determined on the record for

the year 1957 and the projected results for the year 1958 While

this may have a

tendency to lessen somewhat the values applicable

to the year 1957 because of depreciation it is deemed that the results

will not be unreasonable

47 In table III are set forth the rate bases claimed by the Con

ference and in table IV the rate bases claimed individually by

Waterman

6 F M B
32 FEDE RAL MARITIME BOARD

TABLE lII Rate bases claimed by theC01tference

Bull

Vessels

1

12 048 

VVorking capital 2 000 

Brooklyn terminaL

nonowned

5 000 

Philadelphia terminaL do 3 064 

Baltimore terminaL do

6 000 

Puerto Rico terminals 4 062 

Other property 747 

Claims pending 22 

Total

Alcoa

Vessels

VVorking capital

New York terminaL n

nonowned

Baltimore terminaL do

Mobile terminaL do

New Orleans terminaL n do

Puerto Rico terminaL n do

Terminal equipmenL do

Structures

Equipment

Spare parts

Total

Lykes

Vessels

VVorking capital

Terminal property

Other property

Statutory reserve funds

Total

Vaterman

Vessels

VVorking capital

Mobile terminaL nonowned

New Orleans terminaL do

Puerto Rico terrninaL

Furniture fixtures and other equipmenL

Office building Mobile

P R stevedore equiprnent

P R wharf

equipmenL

n

Total

32 945 

5 183 

1 233 

2 015 

1 117 

1 901 

825 

1 500 

356 

98 

231 

67 

14 532 

Grand total 62 680 

1

This figure does not include any value assigned for Liberty ships and because o

error In calCUlation In the conference brief should be 12 288 581 on the basis cla

by the Conference

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE IN9REASES 33

TABLE IV Rate bases claimed by Waterman

Method 1

Vessels average of reproduction cost depreciated and net

book value 1

4 666 171

Other property 3 474 913

VVorking capital 1 892 107

Total 10 033 191

Method 2

Vessels market value

Other property

VVorkingcapital

Total

3 070 500

3 474 913

1 892 107

8 437 520

1

This fignre although labeled average of reproduction cost depreciated and net book

value embraces as an element the depreciated value of replacement vessels rather than

reproduction cost depreciated of the vessels employed

48 The items listed in table III designated as other property

structures equipment spare parts terminal property furniture fix

tures and other equipment office building and stevedore and wharf

equipment represent allocations of owned property carried into the

claimed rate bases at net book value and there is generally no dispute

concerning the propriety of including such asset values There is

little justification for the inclusion of the item called claims pend

ing in Bull s rate base and it will not be further considered

49 Lykes alone among the respondents does not cla im as a part of

its rate base the values of any nonowned terminals on the ground

that its vessels utilize a number of different public terminals and

the ratio of its use of any particular terminals would be minimal and

difficult to determine Accordingly it claims as expense items in its

profit and loss statements the full rentals paid for terminal use It

includes in its claimed rate base statutory reserve funds amounting to

2 022 488 made up of capital reserve funds of 1 734 919 represent

ing accumulated depreciation on the portion of its vessels allocated

to the Puerto Rican services and special reserve fund amounting

to 287 569 Both ofthese reserve funds are required to be maintained

in connection with Lykes subsidized foreign operations under

section 607 of the Merchant Marine Act 1936 as amended 46 D S C

1177 We are not impressed with the argument that these statutory

reserve funds should be considered as property devoted to the Puerto

Rican service and no further consideration will be given to this item

50 Vessels In table III the vessels allocated by respondents to

the Puerto Rican trade are valued by weighting original and repro

duction costs depreciated using as factors 70 percent ofreproduction

cost depreciated and 30 percent of acquisition costs depreciated

These percentages wererejected by us in General Increases in Alaska n

6 F M B
34 FEDE RAL MARITIME BOARD

Rates and Oharges 5 F MB 486 498 i958 Respondents arg

that Bull has in the distant past built its own ships and operated 

the Puerto Rican trade with newly constructed tonnage and 

developed plans for replacement vessels although there are no p

ent indications that new ship constructian will be embarked upon 

the near future that Alcoa has likewise had naval architects prep

designs for replacement vessels and that Lykes is contractually c

mitted to a ship replacement program in connection with its su

dized aperations For these reasons the Conference contends t

the circumstances here present differ from those in the Alaskan c

and justify the use of the 70 percentj30 percent weighting T

examiner used an average of original costs and repraduction co

citing Rates of Inter Island Steam Navigation 00 Ltd 2 U S M 

253 1940 Alaskan Rates 2 U S MC 558 1941 and 2 U S M 

639 1942 General Increase in Hawaiian Rates supra and Gen

Increase in Alaskan Rates and Oharges supra

51 Table V shows after allocation the original and reproduct

costs depreciated as of December 31 1957 the averages thereof 

the market values of the vessels employed by respondents The m

ket values are averages of the domestic market values stated in pa

graph 39 above taken so as to eliminate extremes of value occasio

by the special circumstances detailed As in the case oftable III 

vessel values in the case of Bull do not include assigned values 

Liberty type vessels which the record indicates will occupy a dim

ishing role in its operations

TABLE V Vessel values

Original Reproduction Dome

cost cost Average mark

depreciated depreciated valu

BuIL u n n n 4 875 995 16 890 740 10 883 318 7 6

Alcoa n n U U n nn 1 421 166 7 487 081 4 454 124 3 9

Lykes

U n n n n n n 993 200 5 409 969 3 201 585 2 3

Wsterman u n

u

n 1 152 132 6 535 356 3 843 744 3 1

Totals n u n 8 442 493 36 323 146 22 382 771 17 0

52 vVe disagree with both the Conference and the examine

to the fair and reasonable value of respondents vessels What 

spondents are entitled to is a fair return on the reasonable v

of the property at the time it is being used for the public 

Diego Land Oompany v National Oity supra We find that 

value of the vessels an the domestic market at or about the time 

rate increase is requested with adjustments to eliminate short t

peaks in vessel values is the proper method far determining 

reasonable value of the property being used for the public vVe 

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 35

not feel that we should assume for rate making purposes that a

earrier has reproduced its vessels When the carrier has reproduced

a vessel and placed it in service he is entitled to a fair return on its

value Until then the shipping public should not be forced to pay

rates based even in part Qn the conjectural value of some phantom

vessel which may never serve it To the extent the conclusions set

forth in prior cases disagree with those expressed herein they are

overruled

53 We find the fair and reasonable values of respondents vessels

devoted to the Puerto Rican service to be those set forth in table V

under the heading Domestic market values

54 Working capital The examiner found that a fair and reason

able allowance for working ca pital as an element of the rate bases

would be approximately one twelfth of the annual operating ex

penses experienced in 1957 of the respective carriers exclusive of

depreciation or 1 800 000 for Bull 860 000 for Alcoa 360 000

for Lykes and 615 000 for Vaterman

55 The Conference excepts to the finding in paragraph 54 con

tending that the carriers are entitled to 1 a Duffer fund equivalent

to one twelfth of annual operating expenses exclusive of depre

ciation plus 2 an amount sufficient to cover the lag in revenue

collections behind the related disbursements citing Alaskan Rates

supra Under this method tJhey say Bull is entitled both to the

buffer of one twelfth of operating expenses or 1 800 000 and the

collection lag of 1 000 000 and that the other respondents are

entitled to a similar working capital de rmination

56 Interveners and Public Counsel also except to the examiner s

finding contending that working capita I

should be computed on the

basis of the requirements laid down in General Order 31 46 CFR

sec 286 3 a 1

1

57 In General Increases in IJawaiian Rates supra we used Gen

eral Order 71 as the method for computing working capital as an

element of tJhe rate base In General Increases in Alaskan Rates

and Oharges supra we disallowed claimed working capital com

puted by the formula detailed in the Alaskan Rates cases supra

and allowed working capital calculated in accordance with General

Order 71 superseded by General Order 31 and we characterized

that General Order as basically consisting of the average voyage

expenses for each vessel in the carrier s fleet

58 The examiner concluded that use of the formula was inappro

priate in this proceeding pointing out that under Limitation 3 the

1

Limitations 3 and 4 of that order which relate to the computation of working capital

are set forth in tbe appendix

6 F M R

7 047 0 64 4
36 FEDE RAL MARITIME BOARD

inclusion by Bull in its current liabilities of annual installments 

on its debt and annual interest payments would leave it with a

ne

tive balance for working capital We find nothing in this rec

to warrant a reversal ofourholding in Generallncreases in Hawa

Rates supra and General Increases in Alaskan Rates and Oharg

supra We will clarify those two decisions in one respect howe

In determining a fair and reasonable allowance for working cap

as an element of rate bases in proceedings such as these we w

limit the amount to that determined under Limitation 4 of Gen

Order 31 and giveno consideration to Limitation 3

59 We find that the fair and reasonable allowance for work

capital would be the amount computed under Limitation 4 ofGen

Order 31 or 1 087 000 for Bull 264 100 for Alcoa 222 100 

Lykes and 285 800 for Waterman

60 Property used but not owned As is indicated in table 

Bull Alcoa and Waterman claim as elements of their rate ba

substantial amounts representing the value of terminals and term

equipment used by them in their Puerto Rican services which 

owned by others Inconjunction with these claims Bull has adjus

its operating expenses to substitute owners expenses detailed on 

record in the case of the Brooklyn and Philadelphia tenninals 

terminal rentals and has credited its revenues with the profits 

rived from the operation of the Puerto Rican terminals by its s

sidia ries Alcoa has adjusted its operating expenses to elimin

rental costs for terminals and vVaterman has adjusted its operat

expenses to eliminate profits from the operation of its Puerto Ri

terminal owned by Waterman P R However Waterman claim

operating expenses the rentals paid for terminals at Mobile and N

Orleans and the record affords no basis for determining the amo

of such rental payments The Baltimore terminals used by Bull 

Alcoa are leased to them free by the owners as an inducement 

increase the amount of traffic moving over the piers and Bull s re

payments for its Philadelphia pier are substantially less than own

costs

61 The examiner found that in the case of Bull and Alcoa 

inclusion in their allowable rate bases of the value of property u

but not owned with the concurrent elimination from operating 

penses of rentals paid for such property and the substitution 

owners expenses therefor is reasonable and proper In the 

ofWaterman however he found that since it was impossible to de

mine on the record its rental payments for the use of its Mo

and New Orleans terminals or the expenses of the owners ther

that the value of such property should not be included in its 

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 37

base IIi arriving at the value of property used but not owned he

found the proper valuation to be the net book value where ascertain

able or if not a value on the basis of other evidence of record The

examiner concluded that prior decisions of the Board had allowed

for rate base purposes the value ofproperty used although not owned

by the carriers which he states is in accord with the accepted theory

ofvaluation

62 In our most recent ruling on this point in GeneralInoreases in

Alaskan Rates and Oharges supra we included the value of a

chartered vessel in the carrier s rate base but excluded certain non

owned shoreside property since it was difficult if not impossible to

determine its proper value We think we were in error in including

the value of the nonowned assets We are not impressed with the

arguments of the Conference that such assets should be included in

the rate base of some of the respondents We note that Lykes did

not claim as part of its rate base such nonowned property and it

appears that Bull did not include piers owned by the Commonwealth

Further in the case of Waterman the examiner refused to include

the value of such property in its base Again in the case of Alcoa

in arrivingat a value to be included in that company s rate base the

examiner because of insufficient data reduced the amounts claimed

by the same percentage he had reduced Bull s claimed values These

same problems led us to conclude in General Inoreases in Alaskan

Rates and Oharges supra that certain nonowned property was not

properly includable in the carrier s rate base

As indicated above such assets wereclaimed by some ofthe carriers

and not by others were excluded by the examiner in the case ofWater

man and Bull apparently did not claim all of such property Thus we

are asked to arrive at rate bases of various carriers containing different

elements depending in some cases on the claims of the carrier and in

others on the evidence submitted by it as to the value ofthe property

This we will not do Proceedings such as this are difficult enough

without adding to the problems Respondents present no binding

precedent that requires us to include such property in a carrier s rate

base We do not feel that either logic or law necessitates the inclusion

of nonowned property The carriers are not devoting their capibil

to the shipping public insofar as such property is concerned It is

proper of course to include in allowable expenses the rental paid and

other expenses of the carriers which arise by reason of the use of such

facilities but to include the value of nonowned property in the rate

bases in ouropinion would grant the carriers a windfall at theexpense

of the shipping public

6 F M B
38 FEDERAL MARITIME BOARD

63 BuZZ s Puerto Rican terminal The examiner included in 

rate base ofBull 2 144 572 thenet book value as ofDecember 31 1

of certain Puerto Rican terminals owned by Bull and devoted to 

trade Public Counsel excepts to this inclusion and the Comm

wealth contends that the amount should be reduced by some 475 

representing the total acquisition cost of certain property adjoin

one of the terminals on which is located a building which occu

about one twelfth of the area and which is leased for purposes 

related to the Puerto Rican trade The remainder of the prope

admittedly is used for terminal services and the building rentals 

credited to the Puerto Rican services of Bull We agree with 

examiner that 2 144 572 should be included in the rate base of Bu

representing the value of Bull s Puerto Rican owned terminals T

property is owned by Bull and devoted to the trade and rentals fr

the building as well as any profit realized from the operation of 

terminal will be credited to Bull s Puerto Rican service Under s

circumstances there is no justification for excluding the terminals 

whole or in part from Bull s rate base

64 Recapitulation Table VI sets forth thetotal values ofrespo

ents property devoted to their Puerto Rican services as found for 

purposes of this proceeding reflecting the findings specifically m

above concerning the valuation of vessels working capital and 

minals and terminalequipment as ofDecember 31 1957 and reflec

also the net book values of all otherproperty as of December 31 1

as found in the record In the case ofLykes net book values for s

other property were not submitted as of December 31 1957 and 

values included are the averages of net book values shown in 

record as of June 30 1957 and as of June 30 1958

TABLE VI Vawes

Bull 11 491 987

Alcoa 4 570 966

Lykes 2 680 

Waterman 5 350 

REVENUES AND EXPENSES

65 General As stated in paragraph 46 above in the present 

ture of this proceeding it is possible to determine with reason

accuracy the actual operating results experienced by respond

during 1957 in the performance of their Puerto Rican services 

thus to make findings concerning the lawfulness of the 15 perc

increase Reasonable projections for the future may be made ba

upon revenue and expense data submitted by respondents cove

the first six months of operations in 1958 under the combined 

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 39

percent and 12 percent increases by which the lawfulness of the

combined increases may be gauged Numerous issues are raised by

the parties concerning the revenues to be assigned to the Puerto Rican

trade and the expenses allowable Certain ofthese relatingto aUqca

tion methods employed by respondents depreciation claimed by them

and the adjustment of expenses to eliminate rental costs for nonowned

terminals or to substitute owners costs therefor have been treated

separately above and need not be restated here In restating the

assignable revenues and allowable expenses the findings there made

will govern Generally disposition of the issues raised concerning

1957 expenses and revenues will suffice and later data restated

accordingly

66 Interveners and Public Counsel contend that the revenues of

respondents for 1957 should be restated so as to give effect to a full

year s operations under the 15 percent increase which became effec

tive on January 10 of thatyear Itis also contended that the expenses

of Bull for that year should be adj usted so as to eliminate the

expenses il1curred during the strike mentioned in paragraph 8 above

of which 643 037 of general operating expenses and 146 483 of

depreciation are allocable to the Puerto Rican services on the ground

that this strike was unique in character and occurred for reasons not

related to the Puerto Rican trade As to the strike expenses the

examiner concluded that the effect on the revenue position of Bull

was no different except in degree from that of any other strike for

which no claim was made Ve disagree with the examiner This

strike was unrelated to the ordinary labor management controversies

and the general operating expenses incurred during the strike shoqld

be excluded from Bull s expenses for 1957 but no sound reason is

shown for the elimination of depreciation expenses incurred during

that period vVith respect to the restatement of revenues to cover

a full year of the 15 percent increase we agree with the examiner

that the operating results for 1957 do not enter into projections for

the future and restatement thereof so as to reflect a full year s opera

tion would serve no useful purpose

67 1957 revenues and expenses Bull shows operating revenues

for 1957 of 21 646 383 which are adjusted to include amounts of

117 954 covering interest revenue from a mortgage on theBrooklyn

terminal held by Bull 86 018 covering net profit of the Puerto

Rico terminal companies and 68 187 covering top wharfage col

lected in Philadelphia Public Counsel and interveners contend

that the revenues should be further adjusted so as to include 38 335

of the net profits of Caribbean Dispatch Inc earned in carrying

bagged raw sugar under contract terms which normally would have

6 F M B
40 FEDKRAL MARITIME BOARD

been transported by Bull at tariff rates and 60 069 of profits ear

by Bull in conducting independent stevedoring operations in Pu

Rico for other carriers during the strike peried Of these adj

ments the examiner found that only the inclusion of the inte

revenue is improper that it is included only for the reason that 

value of the Brooklyn terminal is claimed in Bull s rate base 

that it is no more a part olf the earnings derived from the Pue

Rican service than the revenue from any other unrelated investm

We agree with the examiner as to the interest revenue but are 

the opinion that elimination of the strike expense for 1957 as fou

above requires also thllit the bagged raw sugar and stevedo

profits should be excluded from the assigned revenues

68 Bull shows total allocated operating expenses of 22 644 

Adjustments upward include 95 872 covering costs incurred a

result of actions brought in Puerto Rican courts for overtime wa

by stevedore foremen and 69 273 covering the excess al actual Pue

Rican overhead expenses over budget provisions tJherefor Adju

ments downward include a credit of 145 299 for stevedore overh

charged into the stevedoring account 72 319 to substitute own

expenses for terminal rentals 3 813 to cover a correction in 

allocation of 1957 strike expenses and a stipulated correction 

35 232 in mangement and operating commissions Manufactur

Association of Puerto Rico contends that the adjustment of expen

to cover the foremen s overtime suits is improper on the grou

that the expense is attributable to a violation of law by Bull T

suits arose from a difference of opinion as to Bull s

liability 

overtime payments and the costs incurred by Bull are operat

costs properly includahle

69 Manufacturers Association of Puerto Rico alsO centends t

Bull s 1957 expenses sheuld be adjusted downward by 6 398 

reflect an allecation Of inactive vessel expense and depreciatien 

other equipment to the Deminican traffic which allecatien was 

made by respendents and this adjustment is censidered proper 

agree with the examiner that eperating expenses sheuld be reduced 

139 404 to cover the excess of commissions paid to A H Bul

Co ever and abeve the cests of the latter as allocated on a reven

prorllite

70 Aloca shows gross operating revenpes in 1957 of 9 175 9

Operating expenses after allocation were 10 615 037 adjus

downward hy 423 120to exclude pier rentals

71 Lykes shows gress operating revenues in 1957 of 3 774 8

Operating expenses after allocation were 4 540 813

6 F M B
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 41

72 Waterman shows gross Operating revenues in 1957 or 9 416 267

covering both its Gulf and North Atlantic operations Expenses

were 8 771 685 Interveners contend that the expenses should be

adjusted to eliminate clrarter hire of 32 400 on a v eJ included

in the rate base and to eliminate 13 770 interest on a vessel mort

gage Since the vessel is not included in the rate base the charter

hire paid is a proper expense Interest payments are not operatinK

expenses as such but are rather costs of capital employed which

should be borne out of profits earned and an adjustment is proper

It is also contended that Waterman s revenues and expenses for

1957 should be restated so as to elirpinate the results of its North

Atlantic service which was conducted in that year at a loss for

the reason that such service was only temporarily operated As

stated above operating results for 1957 do not enteil into projections

for the future and the service was instituted by Waterman with

the full intention of m aking it permanent To eliminate the results

of this service would distort the actual revenue position of Water

man in defiance of the facts ofrecord

73 Giving effect to the findings above including elimination of

strike expenses and adjustments relating thereto and the adjustment

in Bull s revenues as found in paragraph 67 above and the inclusion

of rental expenses and deletion of owners expenses for nonowned

property disallowed in the rate base table VII shows respondents

operating results in 1957 as adjusted

TABLE VII 195operating results

Revenues Expenses Net profit

or loss

Bull n u n n n 21 800 488 21 835 989 35 501

Alcos n n n U u u n n 9 175 949 10 615 037 1 439 088

Lykes n n nn n 3 774 843 4 540 813 765 970

Wsterman n 9 416 267 8 757 915 658 352

74 1958 revenues and expenses As stated in paragraph 17 above

respondents revenue projections where given were based on an ex

tension oftheir most recent experience that for the first half of 1958

subjected to adjustments for known or contracted cost increases

Revenues for 1958 were calculated as twice those for the first six

months adjusted to give effect for the fullyear to the 12 percent in

crease which became effective January 15 Expenses for the first

six months were adjusted upward by about 1 percent Waterman did

not submit future projections basing its position on the fact that it

6 F MB
42 FEDE RAL MARITIME BOARD

ceased operations in the trade and its successor in the operatio

not a respondent herein Waterman contends therefore that no 

sideration maybe given to the future operations of Waterman P 

in the trade in determining the lawfulness of the rates here unde

vestigation Waterman P R is however an existing operato

the Gulf Puerto Rico trade its rates are identical with those u

investigation and it has agreed to be bound by the findings he

Accordingly for the purposes of this report projected 1958 re

for the combined Waterman and Waterman P R operation f

Gulf ports to Puerto Rico are calculated below on the same bas

used by the other respondents Revenues for the first six months 

doubled and adjusted upward by 54 000 as suggested by Pu

Counsel to reflect a fullyear s operation under the 12 percent incre

Expenses for the first six months as adjusted are doubled and 

justed upward by 1 percent to reflect the cost increases expected by 

Other respondents This will fail to give effect to the cost incre

shown by Waterman individually as stated in paragraph 23 ab

but it is expected that similar cost increases will also affect the o

respondents and they are disregarded here in order to treat all 

riers similarly

75 In computing operating expenses for the first six month

1958 Bull included vessel repair expenses on a reserve basis in 

voyage accounts For the period these reserves totaled 197 

Actual repair expenses during the period were 57 951 less than 

amount and Public Counsel and interveners contend that the ex

should be credited to Bull s expenses and only actual repair 

allowed Bull s actual repair expenses were 413 311 in 1957 

562 795 in 1956 and it does not appear that the reserves are exces

For the purpose of projecting expenses over the full year 1958 

reserves for repair expenses will be allowed

76 The combined Waterman and Waterman P R expenses 

ported for the first six months of 1958 in their Gulf Puerto 

service include costs of 8 617 attributable to transfer ofthe Bien

cargo at New Orleans into a vessel regularly providing break 

service to Puerto Rico Waterman contends that this amount sh

not be disallowed Itis an expense of a nonrecurring nature and 

the purpose of projecting future operating results the contention 

merit the adjustment requested will be made

77 Giving effect to the findings relating to 1957 revenues and 

penses and to those made specifically with regard to 1958 table V

Shows respondents revenues and expenses for the first six month

1958 and the projected operating results for the full year 195

6 F M 
ATLANTIC GULF PUERTO RICO GENERAL RATE INCREASES 43

TABLE VIII 1958 operating results

Firsthalf 1958 1958 projected

Revenues Expenses Revenues Expenses Net profit or

loss

BulL 11 706 918 11 3e4 232 23 650 643 23 070 350 580 293

Alcoa

4 215 049 4 990 803 8 484 000 10 027 000 1 543 000

Lykes n n 1 940 279 2 150 083 3 919 737 4 318 234 398 497

Waterman and WatermanP R 4 121 323 3 417 080 8 296 646 6 902 501 1 394 145

DISCUSSION AND CONCLUSION

In our order remanding the proceeding for further hearing we di

rected that the record should be sufficient for consideration of the

issues either through analysis of all carriers or through considera

tion of Bull as the rate making carrier The examiner treated re

spondents as a whole We disagree In GeneralIncrea8es inHawai

ian Rates supra and again in General Increa8es in Ala8kain Rates

and Oharges supra we followed our prior decisions and adhered to

the principle that the dominant carrier in a noncontiguous domestic

trade will be taken as the rate making line We find nothing in the

present record which warrants a different conclusion here Bull is

by far the dominant carrier in the trade and its gross revenuesduring

the first half of 1958 exceeded those ofthe other three carriers They

were approximately two and one half times those of the next largest

carrier Consideration of the issues will be made on the basis of Bull

as the rate making carrier

On the basis of the findings set forth herein Bull in 1957 suffered a

loss of some 35 500 and the 15 percent increase has been shown to

be fully justified On the basis of the 1958 projection which we

have found to be reasonable Bull on a rate base of 115 millions

during 1958 would earn 5 0 percent before income taxes

The Corrunonwealth contends that Bull s allowable return should

be 5

percent The Conference argues that a rate of 10 percent after

taxes is reasonable Public Counsel says 7 5 percent after tax is the

proper rate of return Our predecessors fixed 7 percent after taxes

in Rates of Inter Island Steam Navigation 00 Ltd supra and 7 5

percent in Alaskan Rates supra Recently in General Increases in

Alaskan Rates and Oharges mpra we allowed rates of return of

5 22 and 8 90 percent upon two alternative methods ofrate base valua

tion We find that a rate of return of not in excess of 7 5 percent

after income taxes ofthe rate bases determined as set forth in ourfind

ings is fair and reasonable

6 F M B
44 FEDERAL MARITIME BOARD

In view of our finding as to a fair and reasonable rate of re

and the finding as to Bull s earnings under the combined 15 per

and 12 percent increases we find it unnecessary to give further 

sideration to the contentions of the Commonwealth with respec

thetreatment ofincome taxes

The Conference excepts to the examiner s failure to include in 

rate base a separate amount for going concern value As we sa

Gene l allnc ease8 in Ala8kan Rate8 and Oha l

ge8 8Up l

a at page 

Neither the Board nor any of its predecessors has ever includ

separate going concern value in arate base

We see no reason to depart from thefair return on fair value st

ard which the Board and its predecessors have used and we rejec

contention of the Conference that the operating ratios experie

by respondents should be considered as amethod of determining 

reasonableness ofthe rates here involved

UVrIMA lE FINDINGS

We find and conclude that the 15 percent and 12 percent incre

here under investigation are just and reasonable

An order discontinuing the proceeding will beentered

6 F M 
ATLANTIC GULF PUE RTO RICO GENERAL RATE INCREASES 45

APPENDIX

General Order No 31 provides in pertinent part as follows 46

jFRsec 286 3 a 1 in part

LIMITATION 3

ADJUSTED WORKING CAPITAL

The excess if any of the balance of Adjusted Working Capital of the

operator and its wholly owned subsidiary companies as of the balance sheet

date after interim adjustments thereof as provided in para aph d of this

section and allocated to subsidized operations as provided in paragraph e of

this section over Limitation of Adjusted Working Oapital in subsidized

operations as defined in Limitation 4 sball be deemed to be Capital Held

in Reserve in the business and shall not be taken into account in determining

lcapital employed

For the purpose of applying this Limitation Adjusted Working Capital

shall include only the following aceourits defined inPart 282 of this chapter

Account8

10199

369

Current assets less reserves and provision for accrued deposits in

statutory reserve funds other than voluntary deposits which shall

notbe accrued for deposit

Unterminated voyage expense

Deferred charges to operations and prepaid expenses

200

371389

Less

40534 Current liabilities excluding mortgage notesvessels and other

liabilitiespayable from statutory reserve funds

495 Advance ticket sales and deposits

500 Untermi ated voyage revenue

The provision for accrued deposits into the statutory reserve funds referred

to in Accounts 100199 hereinabove sball include but is not limited to the

fOllowing

i Accrued d preciation on vessels required to be deposited intq the Capital

Reserve Fund

ii Proceeds from sale or loss of vessels and other amounts which upon

eollection are required to be deposited into the Capital Reserve Fund

iii All accrued mandatory depOsits into the Special Reserve Fund

LIMITATION 4

LIMITATION OF ADJUSTED WORKING CAPITAL

Adjusted Working Capital as determined under Limitation 3 shall be

allowed as capital employed to the extent of the Total Average Voyage Ex

penses employed in subsidized operations determined as follows

6 F M B
46 FEDERAL MARITIME BOARD

Average Voyage Expenses shall be determined on the basis of the a

expenses of operating and maintaining the subsidized vessels excluding l

expenses for a period represented by the average length of time of all 

voyages excluding lay up periods calculated separately for each subs

service line For the purposes of this Limitation the term line sh

deemed to mean those described inPart I of theOperating DifferentialSu

Agreement or In instances where the routes or services described there

not designated as lineS then the trade routes referred to In Part I

o

Subsidy Agreement shall for such purposes be deemed to be lines Pr01

That in any event passenger services shall be deemed to be lines separat

distinct from freight services And pr01Jided further That in Instances 

unsubsidized vessels are operated in subsidized services and are subject 

reserve and recapture provisions of the Agreement they shall not be cons

as a separate category but shall be included withthe subsidized vessels fo

lineinvolved

This determination shall be made in the following manner

First By dividing the sum of such expenses for the accounting perio

volved applicable to the subsidized vessels in each such service line b

aggregate number of days excluding lay up days consumed in all vo

of such vessels in each such service line terminating during such period

Second By multiplying the quotient thus obtained by the number of 

excluding lay up days in the average voyage in each such service 

and

Third By multiplying the resulting product by the quotient of the 

number of days excluding lay up days consumed in voyages of subs

vessels in each such service line terminating during the accounting p

divided by the number of calendar days within the accounting period

The expense of operating and maintaining the subsidized vessels shall in

overhead Accounts 90955 less Accounts 670 and 895 allocated to subs

operations under fi 286 4 and total Operating ExpenseTerminated Vo

Accounts 701 799 in Part 282 of this chapter For the purpose o

Limitation 4 if in any instance the average subsidized voyage i

subsidized service line as determined above is of less than ninety 90 

duration the expense of hulland machinery insurance Account 755 and 

Insurance Account 757 shall be determined to be that for a period of n

90 days Provided That such allowance for insurance expense sha

in the aggregate exceed the total actual insurance expense for the acco

period Expenses used for this purpose shall be those included in the a

accounting for each calendar year flIed under Part 292 of this chapte

shall notbe adjusted thereafter

6 FM 
ORDER

Ata Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C onthe 28thday ofApril AD 1960

No 807

ATLANTIC GULF PUERTO RICO GENERAL INCREASE IN RATES AND

CHARGES

This proceeding having been instituted by the Board on its own

motion and having been duly heard and submitted by the parties and

full investigation ofthe matters and things involved having been had

and the Board on the datehereof having made and entered ofrecord a

report stating its conclusions and decision thereon which report is

hereby referred to and made a part hereof and having found that

the proposed rates and charges under investig tion are just and

reasonable

Iti8 ordered That thisproceedingbe and it is hereby discontinued

By the Board

Sgd JAMES L PIMPER

Secretary

6 F M B
FEDERAL MARITIME BOARD

No 867

PROPORTIONAL COMMODITY RATES ON CIGARETI ES AND TOBACC

Submitted February 9 1960 Decided ApriZ 28 1960

Proposed proportional commodity rates on cigarettes cigars and tobacco 

New York N Y Port Newark N J to Ponce and San Juan P R f

unduly preferential of the port of New York and unduly prejudici

the port of Baltimore in violation of section 16 of the Shipping Act 

Proposed rates ordered cancelled and proceeding discontinued

Warren Price Jr and W O Farnell Jr for respondent

Mark P Schlefer for United States Atlantic Gulf Puerto 

Conference William L Marbury and John M Jones Jr for M

land Port Authority Oharles McD Gillan for Baltimore Asso

tion of Commerce and Alfred K Kestenbaum for Cigar Manu

turers Association ofAmerica Inc interveners

FrankGormley Robert E Mitchell and EdwardAptaker as Pu

Counsel

REPORT OF THE BOARD

CLARENCE G MORSE Ohairman TRos E STAKElf Jr Vice

Ohairman SIGFRID B UNANDER Member

By THE BOARD

By its freight tariff No 5 FMB F No 5 and supplements 

1 2 and 3 filed with the Board to become effective on Augus

1959 Pan Atlantic Steamship Corporation respondent prop

to establish proportional commodity rates on cigarettftS and tob

NOS as defined in the tariff from New York N Y Port New

N J to Ponce and San Juan Puerto Rico when originating 

Petersburg and Richmond Va and Durham Greensboro Re

ville and Winston Salem N C and on cigars from and to the s

ports when originating at Richmond Upon plotest the Boar

48

6 F M 
PROPORTIONAL COMMODITY RATES ON CIGARETTES AND TOBACCO 49

order of August 24 1959 instituted this investigation to determine

the reasonableness and lawfulness of the tariff schedules pursuant

to the Shipping Act 1916 the 1916 Act 46 U S C 801 et seq and

the Intercoastal Shipping Act 1933 46 U S C 843 et seq and sus

pended the operation of the schedules to and including December

24 1959 Respondent voluntarily has extended the effective date

of the suspended schedules untillVlay 24 1960 to permit disposition

of this proceeding United States Atlantic Gulf Puerto Rico

Conference the Conference l1aryland Port Authority the Au

thority and Baltimore Association of Commerce the Association

intervened in opposition to the proposed rates Cigar l1anufacturers

Association of America Inc intervened as its interests might ap

pear but took no active part in the proceeding

Hearing was held before an examiner and in his initial decision

he concluded and found that the proposed rates would unduly prefer

the port of New York and would be unduly prejudicial to the port

of Baltimore in violation of section 16 First of the 1916 Act Ex

ceptians to the initial decision and replies thereto were filed and

oral argument was heard Exceptions and proposed findings not

discussed in this report norreflected in our findings have been con

sidered and fowld nat justified by the facts 01 nat related to material

issues in this proceeding

Respondent serves only New York in the North Atlantic does

not serve Baltimore Thid and has no intention of extending its serv

ice to the latter port Its weekly service to Puerto Rico is a new

and modern coneept of through 111otor water trailership transporta

tion ina ugurated in July 1958 Cargo is carried in standard size

highway trailer vans which are loaded on and discharged from

the vessel by ship s cranes Each trailer van is provided with a

special chassis for its movement as a unit to and away from the vessel

A connecting motor carrier s truck tractor may be attached to the

chassis unit Tor haul of the trailer van to and from interior points

This method of operatian eliminates intermediate handling of the

shipment from the tillle it is loaded in the tra iler van at point af

arigin until it is discharged at destinatian in puerto Rico and is

suitable for a wide range of articles moving ta Puerto Rico especially

far commadities having relatively high value and susceptibility

ta loss and damage in handling

Despite solicitation af the traffic respondent has carried only 108

cases of cigarettes of which 25 ariginated at Richmand and Reids

ville and na cigars 01 tobacco from any of the six interiar arigins

mentianed abave The cigarettes all moved in October 1958 during

6 F M B
50 FEDE RAL MARITIME BOARD

a period when one of the conference carriers serving Baltimore 

strike bound Sales efforts with the shippers involved have 

unfruitful because of alleged lower total freight charges thro

the port of Baltimore than are applicable over respondent s 

Accordingly the proposed rates have been designed to equalize 

through motor water charges via New York with those applic

via Baltimore

The proposed rates are published in two parts in the suspe

schedules The first part names basic port to port commodity rat

58 cents per cubic foot 1on cigarettes and cigars and 55 cents 

cubic foot on tobaccos NOS both subject to minimum weigh

28 000 pounds These basic rates are on the same level as resp

ent s present rates They are also on the same level as the pre

rates maintained by the Conference As in the case of all other 

modities the port to port rates on cigarettes cigars and tobac

both respondent and the Conference are the same from all por

the United States to Puerto Rico The second part of the suspe

schedules names proportional differentials by which to determin

amounts to be deducted from the ocean charges calculated o

basis of the basic commodity rates and depending on the partic

origin of the commodities shipped These differentials are 10 

per 100 pounds minimum 25 000 pounds on cigarettes and tob

originating at Petersburg 24 cents per 100 pounds minimum 2

pounds on cigarettes and tobacco originating at Durham Greens

Reidsville and Winston Salem and 26 cents per 100 pounds 

mum 30 000 pounds on cigarettes 6 cents per 100 pounds mini

20 000 pounds on cigars and 6 cents per 100 pounds minimum 2

pounds on tobacco when originating at Richmond

The applicable tariff charges overrespondent s line are compute

first ascertaining the total charges that would result by the applic

of the basic commodity rates and then deductinKthe amounts d

mined by the use of the proportional differentials For exam

on a shipment of cigarettes of 30 000 pounds measuring 1 579 

feet and originating at Petersburg the basic rate of 58 cents per 

foot would produce revenue of 915 82 but when reduced by 

application of the differential of 10 cents per 100 pounds it 

result in a net charge of 885 82 Similarly computed net o

charges on like shipments originating at Richmond and at the N

Carolina points would be 837 82 and 843 82 respectively 

proportional differentials represent the exact amounts in cents 

1 The tariff also names a rate of 143 cents per 100 pounds minimum 28 000 p

on all of the commodities which is inapplicable because of the high cubic to weigh

of the com1modities involve

6 F M 
PROPoRTIONAL OOMMODITY RATES ON CIGARETlES AND TOBAOCo 51

100 pounds that the presently applicable motor common carrier rates

from the interior origins to New York exceed the rates to Baltimore

and a parity ofthrough charges with Baltimore would be established

on shipments over respondent s line through New York The table

below shows the present motor common carrier rates on cigarettes

from interior origins to New York and Baltimore and the highway

distances

Motor comm011rcarrier rates on cigarettes

To Baltimore To New York

From

Rate Distance Rate Distance

Cents Miles Cents Miles

Petersburg n n n 89 166 99 363

Riehmond h u n n n n n

nn Un 66 143 92 340

Durham h

h un n nn

Unnn

n 107 298 131 495

Reidsvillen n n n 107 290 131 487

o reensboron n 107 329 131 526

Winston Salem n n h 107 346 131 543

In each instance the highway distance from interior origins to New

York exceeds that to Baltimore by 197 miles and the most direct

highway route from interior origins to New York lies through Balti

more Respondent does not anticipate that the proposed rates will

generate any new traffic but expects that a portion of the traffic now

moving through Baltimore will be diverted to move over its line

through New York No transit time advantage would be gained by

the shippers on shipments moving through New York as against

those moving through Baltimore It was stipulated by the parties

that respondent has the capacity to handle the traffic involved Re

spondent shows numerous situations wherein rail inland export rates

lower than domestic rates are equalifed to different ports regardless

of distance as for example rates on cottonseed meal cake and related

articles which are the same from Fort Worth Tex to New Orleans

La 533 miles as to Iouston Tex 260 miles

The membership of the Conference includes the principal carriers

operating break bulk services to and from Puerto Rico Of these

Bull Insular Line Inc BullY and Alcoa Steamship Co Inc

Alcoa provide service at Baltimore Alcoa operates a weekly

southbound service which originates at Philadelphia calls at Balti

more and New York in that order and then proceeds to Puerto Rico

For many years Bull operated a

year round weekly round trip serv

ice which began at Philadelphia proceeded to Baltimore and then

direct to Puerto Rico and return to Philadelphia Bull thus was

the only carrier which provided a direct service from Baltimore to

Puerto Rico In 1959 for the first time in order to improve vessel

6 F M B

732 047 0 64 5
52 FEDE RAL MARITIME BOARD

utilization Bull has had its vessels call at N ew York after leav

Baltimore during the summer months eliminating the direct B

more Puerto Rico service although it is contemplated that wi

schedules will resume the direct service because weather condit

will not permitthe continuance of a call at New York in the Baltim

service and still maintain a weekly service with two vessels In 1

after leaving the last port of call free space available in the ves

operating in the Baltimore service averaged 42 percent ofthe ves

cubic capacity under the direct winter schedules as against 24 5 

cent for the vessels which called at New York under the SUIllll1er sc

ules Free space on Alcoa s vessels was also substantial indica

that Bull and Alcoa have ample capacity to carry the traffic 

involved

Cigarettes constitute by far the major portion ofthe traffic origi

ing at the interior points here involved more than 95 percent 

about 85 percent of all cigarettes shipped originate at Richlnond 

cording to the data furnished by Bull In 1958 and 1959 to d

from these interior origins Bull carried 8 064 052 pounds of c

rettes cigars and tobacco measuring 494 891 cubic feet and this 

ume represented about 2 percent of its total cargo out of Baltim

Only about 25 percent of all cargo loaded by Bull at BaJtimore o

nates in that city the remainder being drawn from interior po

Alcoa s share of the traffic is considerably smaller aggregating 402 

pounds measuring 24 529 cubic feet in 1958 and the first three qua

of 1959 Tobacco products are among the higher rated commod

and in the case of Bull annual revenue therefrom is about 160 

Loss and damage claims for Bull are relatively insignificant tota

1 246 in 1957 1 686 in 1958 and 1 096 in 1959 to date

Practically all of the tobacco products moving to Puerto 

through Baltimore are transported in container vans furnishe

Bull and Alcoa and sufficient numbers of such vans are held at 

port for such traffic These container vans are only about one t

the size of the trailer vans utilized by respondent The conta

vans are loaded by the earriers at the port and deliveries in Pu

Rico may

be effected in the vans without unloading at the pier

In order to ounter the proposed rates the Conference filed 

the Board to become effective on tJanuary 24 1960 reduced po

port rates from the United States to Puerto Rico of 54 cents 

cubic foot on cigarettes 57 cents on cigars and 50 cents on tob

NOS These reduced rates are predicated on the basis of equaliz

out of an ports the lowest port to port ocean charges which w

A The effective dates of these schedules have since been extended concurrently with 

of respondent

G If M 
PROPORTIONAL COMMODITY RATES ON CIGARETrES AND TOBACCO 53

result from respondent s proposed proportional rates ana thus would

undercut respondent s proposed rates to some extent but the Confer

ence feels that in order to avoid the possibility bf discrimination

against any tobacco shippers not located at the Virginia and North

Carolina origins here involved equal port to port rates should be

available to all Bull is opposed in principle to the type of port

equalization here proposed by respond nt becau e of its destructive

nature to port interests and would recommena to the Coilference that

further similar reductions made by respondent be met to the point

that the rates cease to be compensatory

It was stipulated that the rates proposed by respondent would be

compensatory and that rates resulting from further reductions by

respondent in its port to port basic rates to the level of the reduced

port to port rates filed by the Conference would likewise be com

pensatory The record indicates thatit is the intention ofrespondent

to meet any rate reductions by the Conference on these commodities

The port of New York has many advantages which attract traffic

from all over the United States including the area around and beyond

Baltimore Steamship lines offer many ore direct sailings out of

New York to all destinations than out of Baltimore In addition to

its preponderance ofsteamship services New York has a far greater

number of supplementary seryices including international freight

forwarders customhouse brokers int rnational banking facilities

steamship line agencies consular services the only foreign trade zone

in the North Atlantic commodity exchanges marine insurance

brokers foreign purchasing agencies and foreign chambers of com

merce Among the North Atlantic ports New York handles the great

preponderance of general cP rgo in foreign trade In 1957 17 118 824

tons ofgeneral cargo in the export and import trades moved through

New York as compared with 4 518 142 tons through Baltimore As

for general cargo exclusive of bulk shipments moving to Puerto

Rico from New York and Baltimore New York s share increased

from 65 7 percent in 1954 to 70 3 percent or an expa ndecl volume in

1957 Exports of manuiactured tobacco through Ne y York in 1957

were 22 673 tons as compared with only 124 tons through Baltimore

indicating that even at unfavorable inland rates export tobacco s

lip

pelS inc luding those at interior Virginia and North Carolina points

favor the port of New York

Section 18 ofthe 1916 Act requires that carriers in interstate com

merce shall establish and enforce just and reasonable rates fares and

charges and just and reasonable regulations and practices relating

thereto and makes unlawful any unjust and unreasonable rates etc

Section 16 provides so far as pertinent

6 li lVIB
54 FEDERAL MARITIME BOARD 

That it shall be unlawful for any common carrier by water or other pe

subject to thisAct either alone or inconjunction withany other person dire

or indirectly

First To make or give any undue or unreasonable preference or advan

to any particular person locality or description of traffic in any respect w

Boever or to subject any particular person locality or description of traff

any undue or unreasonable prejudice or disadvantage in any respect whatso

Respondent contends that the proposed rates are just and rea

able in that they are compensatory and no lower than necessar

meet the competition that proportional rates and particularly 

practice of port equalization have been sanctioned by the Board 

its predecessors and that the proposed rates do not violate sectio

because that section does not embrace ports within its terms and 

cause respondent does not serve Baltimore or participate in r

through that port and therefore it cannot be accused of discrim

tion against the port of Baltimore citing Texas Pacific Ry 0

U S 289 U S 627 1933 The Conference contends that the 

posed rates are unreasonable because they would result in destruc

competition The Authority and the Association contend that 

proposed rates would result in undue and unreasonable preferenc

the port of New York and would unduly prejudice the port of B

more in that they are designed to attract to the port of New Y

traffic which naturally is tributary to the port of Baltimore

In Texas and Pacific Ry 00 v U S supra the Supreme C

held at a time when section 3 1 of the Interstate Commerce 

was generally comparable to the present language of section 16 F

of the 1916 Act that ports as such were not localities with res

to export and import traffic routed through them being not

more than gateways or junction points and therefore were not 

ceptible to undue preference or prejudice within the meaning of 

tion 3 1 Respondent recognizes that in Oity of Mobile v B

more Insular Line Inc 2 U S MC 474 1941 the Maritime C

mission held that with respect to a similar contention ports are 

calities within the meaning of the 1916 Act notwithstanding 

holding of the Supreme Court in Texas ill Pacific By 00 v U 

supra stating at p

478

Defendants fail adequately to consider one point influencing the court s dec

With respect to traffic moving by rail en route to destinations beyond seab

ports are neither origins of the traffic nor shipping producing or consu

areas affected by the rates they are merely transshipping points As to w

transportation a port also is a transshipping point but it is something 

Itis an area affected by the port toport rates established by the carrier 

also the place at which either actually or constructively the contra

affreightment is executed Therefore a port becomes for the water move

6 F M 
PROPORTIONAL COMMODITY RATES ON CIGARETTES AND TOBACCO 55

a point of origin and under the court s decision is within the term locality

even though shipments have received prior rail transportation under an inde

pendent contract

Respondent argues that the quoted language does not apply with

respect to its operations which contemplate the movement in through

service or shipments loaded in trailer vans at interior origins without

off loading at the port From the standpoint of the service which it

performs however respondent s status is no different from that of any

other ocean carrier since it exercises no control over nor participates

in the interior transportation So far as respondent is concerned the

port ofNew York is the origin point of the shipments transported by

it whether or not the shipments have received prior motor

transportation

A contention like that of respondent here that it cannot be accused

ofdiscrimination against the portof Baltimore in view ofthe fact that

it does not serve that port was considered and rejected in Beaumont

Port Oommission v Seatrain Lines Inc 3 F MB 556 565 6 1951

on the ground that injury to a port adversely affected by equalizing

proportional rates is caused directly by the action of the carrier estab

lishing such rates and is proscribed by the statute

Insofar as respondent s services are concerned the proposed rates

would establish varying charges for identical services Such rates

are prima facie discriminatory Oontract Rates J

apanjAtlantic

Gulf Freight Oonf 4 F 1B 706 735 1955 and Oontract Routing

Restrictions 2 U S M C 220 225 1939 and are thus unreasonable in

the absence of justification therefor In Oity of Jiobile v Baltimore

Insular Line Inc supra at page486 it was sta ed

We recognize that proportional rates in water transportation may be proper in

some instances but it must not be presumed that every rate which is lower than

the corresponding local rate is a lawful proportional rate Except when de

livery costs at ports arerelied upon differentials between defendants local rates

and the alleged proportional rates do not reflect any competitive cost or other

transportation factor in the transportation service which defendants actually

perform A carrier undertaking to establish proportional rates should be pre

pared to provesome such relationship

In some earlier decisions the predecessors of the Board approved

proportional rates which represented absorptions of inland rate dif

ferentials Board of 001nl1tission en L O II T D v N Y P R

S S 00 1 U S S B 154 1929 Proportional Westb d Intercoa8tal

Rates on Oa8t Iron Pipe 1 U S S B B 376 1935 Intercoastal Rate

Structure 2 U S MC 285 1940 Later decisions however have

recognized the destructive nature of such absorptions to the right of

ports to traffic originating in the areas natura ly tributary to their port

6 F M B
56 FEDERAL MARITIME BOARD

locations in the absence of adequate ocean service available at 

particular ports See BeaumontPort Oommission v Seatrain Li

Inp 2 U S MC 500 941 and 2 U S M C 699 1943 Beaum

Port commission v Seatrain Lines Inc supraj Oity of Portlan

Pacific WestbouM Oonference 4F MB 664 1955 and 5 F MB 

1956 In Oity of Mobile v Baltimore Insular Line Inc supra 

Martime Commission requir d cancellation of all equalizing 

portional rates then in effect in the Puerto Rican trade and state

pp 4867

To permit continuation of unrestricted solicitation by carriers for bus

through condonation of a practice whereby unfavorable inland rates are 

comewould wholly ignore the right of a port to traffic to which it may be en

by reason of its geographical location Such right app ars fundamental u

statutes designed to establish and maintain ports Under section 8 of the 

chant Marine Act 1920 we are required to recognize territorial regions 

zones tributary to ports and should there exist rates to seaboard which am

other things do not recognize the natural direction of the flow of traffic re

mendations may be made to theInterstate Commerce Commission for such a

as it deems necessary The contention has been made that section 8 has no 

tion to rate regulatory provisions of the Shipping Act 1916 But to wholly ig

basic policies of Congress would be unwarranted

Respondent admits that the traffic here involved normally wo

move through the port of Baltimore and that the proposed rate

successful would operate to divert such traffic away from its no

flow Itcontends however that because of the small amount oftr

involved such diversion would not cause substantial injury to 

port nor have any adverse effect upon the carriers serving Baltim

and that any prejudice to the port of Baltimor resulting from 

proposed rates could not therefore be found undue or unreason

witmn the meaning of the 1916 Act The revenues from such tr

are substantial however The record shows a gradual trend of tr

away from Baltimore and toward New York under the present 

ferentials in inland rates and the principal carrier oftobacco prod

has found it necessary to eliminate during the summer months 

direct Baltimore Puerto Rico service because of insufficient tra

which situation will not be enhanced by the further artificial d

sion oftraffic such as is here proposed Itis true that through the 

posed rates respondent is endeavoring to make available at equa

transportation costs a new and improved type of through sea 

service but there is no evidence that the shippers oftobacco prod

located at Virginia and North Carolina interior points need or d

such service or that the present service available to them through 

port of Baltimore is inadequate or unsatisfactory in any respects

6 F M 
We find that the proposed rates would unduly prefer the port of

New York and would be unduly prejudicial to the port of Baltimore

in violation ofsection 16 First ofthe 1916 Act

An order will be entered requiringcancellation ofthe proposed rates

and discontinuing theproceeding

6 F M B
58 FEDERAL MARITIME BOARD

ORDER

At a Session of the FEDERAL MARITIME BOARD held 

office in Washington D C on the 28th day ofApril AD 19

No 867

rROPORTIONAL COMMODITY RATES ON CIGARETTES AND TOBAC

This proceeding having been instituted by the Board on its 

motion and having been duly heard and submitted by the pa

and full investigation of the matters and things involved having 

had and the Board on the date hereof having made and ente

record a report stating its conclusions and decision thereon 

report is hereby referred to and made a part hereof

Itis ordered That Pan Atlantic Steamship Corporation be 

is hereby notified and required to cancel effective on or before 

31 1960 the schedules under investigation herein designat

follows

Pan Atlantic Steamship Corporation FMB F No 5 and Supplements 

2 and 3

upon not less than one day s notice to the Board and to the g

public by filing and posting in the mannerprescribed by the B

under section 18 of the Shipping Act 1916 as amended an

Intercoastal Shipping Act 1933 as amended and

It is further ordered That this proceeding be and it is h

discontinued

By the Board

Sgd JAlfES L PIMPER

Secret

6 F 
FEDERAL MARITIME BOARD

No S 105

AMERIOAN PRESIDENT LINES LTD ApPLIOATION UNDER SEOTION

805 a

Submitted April 21 1960 Decided AprU 28 960

American President Lines Ltd granted written permISSIOn under Section

805 a of the Merchant Marine Act 1936 as amended for the Operation

or Charter upon time or bareboat terms of Tan er Vessels by Signal

Oil and Gas Company or by any Division or Subsidiary thereof for the

Carriage of Petroleum Products in the Domestic Intercoastal or Coastwise

service since granting of the permission found 1 not to result in unfair

competition to any person firm or corporation operating exclusively in

the Coastwise or Intercoastal service and 2 not to be prejudicial to the

objects and policy of the Merchant Marine Act 1936 as amended

Warner W Gardner for applicant American President Lines Ltd

Robert B food Jr as Public Counsel

INITIAL DEOISION OF EDWARD C JOHNSON EXAMINER

In an application dated December 31 1959 American President

Lines Ltd APL requested written permission under Section

805 a of the Merchant 1arine Act 1936 as ameJlded for the

operation or charter upon time orbareboat terms of tanker vessels

by Signal Oil and Gas Company Signal or by any division or

subsidiary thereof for the carriage of petroleum products in the

domestic intercoastal or coastwise service The application further

requested that the permission be granted as of September 23 1959

and stated that there would be no objection if the permission were

subject to review modification or revocation upon reasonable notice

with any modification or revocation to be effective upon terms not

involvinga breach of any charter obligation

Oln the absence of exceptions thereto by the parties and upon notice by the Board

the initial decision of the examiner became the decision of the Board on the date shown

section 8 a

of the Administrative Procedure Act and Rules 13 d and 13 h of the

Board s ules of Practice and Procedure

l Section 805 a is set forth in Appendix A attached hereto

6 F M B 59
60 FEDERAL MARITIME BOARD

FINDINGS OF FACT

1 Signal owns 48 percent of the voting stock of APL which 

an operating differential subsidy contract under the Merchant 1a

Act 1936 On September 23 1959 Signal acquired by merg

Eastern States Petroleum and Chemical Corporation East

States which has since operated as a division ofSignal

2 APL having learned on November 26 1959 that East

States had a tanker under time charter which was operating in 

domestic service on December 31 1959 applied for the a fores

written permission under Section 805 a of the Merchant Mar

Act 1936

3 Eastern States operates two inter connected refineries loca

about a mile apart connected by a pipe line system at Houst

Texas Itspecializes in the production of arOlnatic intermediate 

aliphatic solvents These are obtained by extraction and by fr

tionation from the components of crude petroleum which lie roug

in the boiling range ofgasoline

4 Eastern States manufactures about 50 different grades of solve

and will also manufacture any other type to the specification of a c

tomer The solvents have a wide variety of chemical and indust

uses paints insecticides surface coatings inks varnishes enam

oil extraction adhesives degreasing rendering and floor wax are a 

of their uses The solvents are produced to and must retain ex

specifications including boiling points color odor specific gravity 

flash point A very minute contamination or a solvent that is off 

will make the solvent useless and unacceptable As implied by th

name the solvents contaminate very readily Atanker which has e

carried black oil for example regardless of how long ago or w

cleaning processes it has undergone even including sand blasting 

contaminate the solvents while the usual small degree of leakage 

valves and pipes vill mean that two or nlore solvents may contamin

themselvesandtherefore become useless

5 Eastern States sells its solvents through its terminals at Houst

Brownsville Chicago l1adison East Liverpool Savannah San Pe

and San Francisco Itcharters as a

shipper space on barges to s

ply the Gulf and l1ississippi terminals and the wing tanks of the 

Angelo Petri a wine tanker on its westbound voyages to supply 

California terminals The Savannah terminal is supplied by 

frequently deliveries to customers are made with the SS Spirit 

Liberty

6 The SS Spirit of Libe rty is a T 2 tanker under a 10 11 year t

charter to Eastern States commencing in June 1957 from the K

6 F M 
AMERICAN PRESIDENT LINES LTD SEC 805 a APPLICATION 61

stone Shipping Company I

eystone In 1958 its tanks 1 and 2 were

remodeled for the carriage of solvents additional compartments were

made and special pumping segregated pipe lines and double block

valves were provided Eastern States uses tanks 1 and 2 for carriag

of its solvents and is careful that its other tanks be confined to clean

service no lube vegetabl or fatty oils have been carried Eastern

States would find it exceedingly difficult or well nigh impossible to

obtain a tanker on the market which would meet its solvent needs

Even ifliners with tanks wereavailable and would happen to have an

itinerary which met the needs Eastern States could not load into its

deep tanks for fear of contamination from a prior product Many of

the solvents moreover have a flash point too low for carriage on dry

cargo vessels

7 The Spirit ofLiberty has frequently been sub chartered to others

for clean service when not needed by Eastern States Except for

these occasions it has carried only products owned by Eastern States

After delivery ofits product it ordinarily returns to Houston in bal

last since the commodity transported is ordinarily regarded as a

one way cargocarriage operation

8 Eastern States was unable at the time of the hearing to predict

whether the future needs ofits solvents business would call for opera

tion of one or more tankers fixed up to meet its needs under time

charter

9 There is no operating connection bebveen APL and any tankers

operated by Eastern States nor is there any way to divert cargo one

from the other Eastern States witness Manager of Product Han

dling had never seen an APL vessel or officer until he met theAPL

witness in thisproceeding and knew nothing ofthe APL services

DISCUSSION

The precise issue presented in this application appears to have

been decided recently by the Board on February 9 1960 in States

lJ arine Lines Inc Application unde1 Section 805 a S 57 ub

4 when the Initial Decision of Examiner Gray became the decision

of the Board Inpertinent part itreads

With its numerous tank compartments of various sizes and capacities and

special piping and pumping arrangements it SS Texas is equipped to and

continuously since February 1957 has been carrying various liquid com

modities shipped in bulk between all U S Pacific ports and U S Gulf and

Atlantic ports

As a subsidized carrier States Marine Lines Inc could not divert cargo

from this intercoastal operation because its vessels are not equipped for the

carriage of liquid commodities in bulk Furthermore U S Coast Guard regu

6 F M B
62 FEDE RAL MARITIME BOARD

lations prohibit standard dry cargo ships carrying such inflammable 

modities in bulk No exclusively domestic operator in the intercoastal t

has objected to continuation of theTexan s operation

On this record it is found that granting of the requested permission 

not result in unfair competition to any person firm or corporation opera

exclusively in the coastwise or intercoastal service or be prejudicial to 

objects and policy of theAct

Then in American President Lines Ltd Section 805 a Appl

tion 4 F MB 436 1954 S 36 permission was granted for 

operation in domestic services of 6 tankers owned by Independ

Tankships a subsidia ry of American Independent Oil Compa

in which Signal and Ralph Ie Davies an officer and directo

APL were shareholders The tankers were subsequently sold 

the open market One of them was the Spirit of Liberty purcha

by I eystone Shipping Company The order in S 36 in relevant p

reads

Itappecwing That American President Lines Ltd has applied to the Bo

and theMaritimeAdministrator forwritten permission authorizing the follow

relationships

II II II

3 For Signal Oil and Gas Co to be a holding company subsidiary affil

or associate of American President Lines Ltd and

Itis o1 dered That written permission as required by section 805 a of 

Merchant Marine Act 1936 as amended be and it is hereby granted authori

the existence of the rela tionships above described retrospectively and p

pectively subject to the condition that none of the vessels owned opera

or chartered by Independent Tankships Inc shall after the date of this o

carry any lubricating oils or vegetable oils including cocoanut or f

oils including tallow or detergents in the domestic intercoastal service

Notice of hearing as published in the Federal Register on Ja

ary 29 1960 and a hearing was held before the undersigned 

Februa ry 16 1960 No one appea red in oppositjon to the applicat

No operating or traffic connection between APL and Eastern Sta

has existed or can develop The manufacture and distribution 

solvents by Eastern States an important industrial operatio

would be seriously if not fatally handicapped by denial of 

necessary permission to operate the specialized and rigidly contro

tanker space necessary for this solvent movement Since East

States cannot predict the volume and nature of its demand sufficie

to specify whether it needs permission for one two ormore tank

6 F M 
AMERICAN PRESIDENT INES VJiD Sl iG 8Q 5 a APPLICATION 63

generali7 ed permission with power reserved to the Administratar

to madify Orrevoke should be given 2

J here app tu

s

to be no reason af s lbstance why permission in ef

fect granted Signal to operate theSpirit of Liberty when owTlecl by a

subsic1iaiY shblild be clutailed to il

ec Lide Signal from operatil g the

same essel 11011 time chaJ tered Q a lh ision J h J

i1 t oj Liberty

1 8 covered by tbe perm ssion glarited in 1954Y Public Coull sel g

wIth the accuracy Of applican t s propo sed findings Of fact and con

clusions and COllcnr therein and da not oppase the granting Of peI

iliission to aPplicant for the operatioil Or chatter llPall time or

bareboat ternis of tankei vessels 1 Signal Qil and Gas CalIipan y

or by any subsidiary Or division there O fOl thcdcan iage Of p trqleUln

pi oGlucts inthe dom estic interc0 st 1 or cOastwise service such per

mission to

besubject

to review modification 01 revocation lfpoil

reasonable trotice

CONCLUSION

On this record it is found thatthe gr lling of the requested l

r

mission subJcct to l Yfew madification and termination by the

oard Administrntion upon 1 showing by a

ny pcrson that contjnu J

tion of the permission would contravene Section 805 a vill not

result in llllfitir competition to any pcrson firm or carporation

operating cx lllsively i l the coast ise or intercaastal service or be

prejuclicial ta the objects anc1 policy of theAct

This report sha H serve as such written pcrmissian requested by

applicant

r

In lmclican Prcsiclcnt JAncs Ltd Scction 805 a Application supra the Board

and Administrator on April 14 195 4 granted permission retrospectil ely and prospec

tively for a Section 805 a relationship which had commenced in March 1948 The

iame nIe which justified a 4 year retroactivity in that proceeding will justify a 6 month

retroactivity in this present proceeding

3 The effeet of the 1954 permission reaches only to the retrospective issue Eastern

States needs flexible permiSSion for its future operations

6 F M B
64 FEDERAL MARITIME BOARD

APPENDIX A

Section 805 a

Itshall be unlawful to award or pay any subsidy to any contractor un

authority of title VI of this Act or to charter any vessel to any person un

titleVII of this Act if said contractor or charterer or any holding compa

subsidiary amliate or associate of such contractor or charterer or any offic

director agent or executive thereof directly or indirectly shall own opera

or charter any vessel or vessels engaged in the domestic intercoastal or coa

wise service or ownhaoY pecuniary interest directly orindirectly in any per

or concern that owns charters oroperates any vessel or vessels in thedome

Intercoastal or coastwise service without the written permission of the C

mission Every person firm or corporation having any interest in such appl

tion shall be permitted to intervene and the Commission shall give a hear

to the applicant and the intervenors The Commission shall not grant 

8 h application if the Commission finds it will result in unfair competi

to any person firm or corporation operating exclusively in the coastwise 

intercoastal service or that it would be prejudicial to the objects and po

of this Act Provided That ifsuch contractor or other person abovedescri

or a predecessor in interest was in bona fide operation as a common car

by water in the domestic intercoastal or coastwise trade in 1935 over thero

or routes or in the trade or trades for which application is made and has 

operated since that time or if engaged in furnishing seasonal service only 

in bona tide operation in 1935 during the season ordinarily covered by its op

tion except in either event as to interruptions of service over which the 

plicant or its predecessor in interest had no control theCommission shall g

such permission without requiring further proof that public interest and 

venience will be served by such operation and without further proceedings 

to the competition in such route or trade

If such application be allowed it shall be unlawful for any of the pers

mentioned in this section to divert directly or indirectly any moneys prope

or other thing of value used in foreign trade operations for which a sub

is paid by the United States into any such coastwise or intercoastal operatio

and whosoever shall violate this provision shall be guilty of a misdemea

6 F M 
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 110

PACIFIC FAR EAST LINE INC APPLICATION UNDER SECTlOK 805 a

S1l bmitted April 29 1960 Decided April 29 1960

Pacific Far East Line Inc granted written permission under section 805 a

of theMerchant Marine Act 1936 as amended for Long Island Tankers

Inc a subsidiary to charter the SS Kaimana to Matson Navigation Company

forone roundvoyage between thewest coast of the United States and British

Columbia and the Hawaiian Islands commencing on or about May 1 1960

and a second like voyage ifthe vessel is chartered to Matson for such second

voyage not later than the date of arrival of the vessel in the Hawaiian

Islands on the first voyage since granting of such permission found 1 not

to result in unfair competition to any person firm or corporation operating

exclusively in the coastwise or intercoastal trade and 2 not to be preju

dicial to theObjects and policy of theAct

Odell Kominers for applicant

Robert B Hood Jr as Public Counsel

REPORT OF THE 1ARITIME ADMINISTRATOR

By THE MARITIME ADMINISTRATOR

Pacific Far East Line Inc PFEL filed an application for written

permission under section 805 a of the 1erchant Marine Act 1936 as

amended 46 U S C 1223 the Act for Long Island Tankers Inc a

subsidiary to charterthe SS J airnana to MatsonNavigation Company

1atson for one round voyage between the west coast of the United

States and British Columbia and the Hawaiian Islands delivery of the

vessel to be effected on or about May 1 1960 at San Francisco with an

option by Matson in thecharter for a second like voyage to be exercised

not later than the arrival of the vessel in the Hawaiian Islands on the

first voyage Notice ofhearing was published in the Federal Register

65

6 M A
66 MARITIME ADMINISTRATION

ofApril 23 1960 25 F R 3559 No one appeared in opposition 

the application

Matson requires a vessel for use in its regular service between 

Pacific coast and the Hawaiian Islands during May It is found t

the granting of the requested permission will not result in un

competition to any person firm orcorporation operating exclusiv

in the coastwise orintercoastal trade or to be prejudicial to the obje

andpolicy ofthe Act

This report shall serve as written permission for the voyage and 

a second like voyage provided the vessel is chartered for such sec

voyage prior to its arrival in Hawaii on the first voyage

6 M 
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 111

MOORE McCoRMACK LINES INC APPLICATION UNDER SECTION

805 a

8ubmlitted May 17 1960 DeoUed May 17 1960

MooreMcCormack Lines Inc granted written permission under section 805 a

of the Merchant Marine Act 1936 as amended for its vessel theSS Robin

Trent presently under time charter to States Marine Lines Inc to en

gage in one intercoastal voyage carrying a cargo of lumber and or lumber

products from North Pacific ports to Atlantic ports commencing on CYr

about May 20 1960 since granting of the permission found 1 not to result

in unfair competition to any person firm or corporation operating ex

clusively in the coastwise or intercoastal trade and 2 not to be prej

udicial to the objects and polley of theAct

IraL Ewers for applicant

Frank Gormley as Public Counsel

REPORT OF THE ACTING MARITIME ADMINISTRATOR

By THE ACTING MARITIME ADMINISTRATOR

Moore McCormack Lines Inc filed an application for written

permission under section 805 a of the Merchant Marine Act 1936

as amended 46 U S C 1223 the Act for its vegseJ the SS Robin

Trent presently under time charter to States Marine Lines Inc to

engage in one intercoastal voyage carrying a

cargo of iumoor and or

lumber products commencing at North Pacific ports on or about May

20 1960 for discharge at Atlantic ports Notice of hearing was

published in the Federal Register of May 7 1960 25 F R 4121

No one appeared in opposition to the application

States Marine has cargo bookings of approximately six and one

half million feet of lumber md lumber products but has boon unable

6 M A 67

732 047 0 64 6
68 MARITIME ADMI NlSTRATION

to obtain any other suitable vessel for aMay sailing which accord

to its witness is now scheduled to commence on or about May 

1960 The sailing of the Robin Trent would not increase the norm

pattern of scheduling in States Marine s eastbound intercoas

oo ce 

It is found that the granting of the requested permission will n

result in unfair competition to any person firm or corporat

operating exclusively in the coastwise or intercoastal trade or 

prejudicial to the objects and policy oftheAct

This report shall serve as written permission for the voyage

6 M A
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 112

MOORE McCORMACK LINES INC ApPLICATION UNDER SECTION

805 a

Submitted May 25 1960 Decided May 25 1960

Moore McCormack Lines Inc granted written permission under section 805 a

of the Merchant Marine Act 1936 as amended for its vessel the SS

Mormac8un presently undertime charter to States Marine Lines Inc to en

gage in one intercoastal voyage carrying a cargo of lumber and or lumber

products from North Pacific ports to Atlantic ports commencing on or

about June 1 1960 since granting of the permission found 1 not to

result in unfair competition to any person firm or corporation operating

exclusively in the coastwise or intercoastal trade and 2 not to be prej

udicial to the objects and policy of theAct

Ira L Ewers for applicant

John E Oograve as Public Counsel

REPORT OF THE ACTING MARITIME ADMINISTRATOR

By THE ACTING MARITIME ADMINISTRATOR

Moore McCormack Lines Inc filed an application for written

permission under section 805 a of the Merchant Marine Act 1936

as amended 46 U S C 1223 the Act for its vessel the SS MornuuJ

sun presently under time charter to States Marine Lines Inc to en

gage in one intercoastal voyage carrying a

cargo of lumber and or

lumber products commencing at North Pacific ports on or about May

28 1960 for discharge at Atlantic ports Notice of hearing waspub

lished in the Federal Register ofMay 14 1960 25 F R 4331 No one

appeared in opposition to the application

States Marine has cargo bookings of approximately six and one

half million feet of lumber and J umber products hut has been unable

6 M A

69
70 MARITIME ADMINISTRATION

to obtain any other suitable vessel for an early June sailing whic

according to its witness is now scheduled to commence on or abo

June 1 1960 The sailing of the Mormacsun would not increase t

normal pattern of scheduling in States Marine s eastbound inte

coastal service

It is found that the granting of the requested permission will n

result in unfaircompetition to any petso firm orcorporation ope

ting exclusively in the coastwise or intercoastal trade or be pr

udicial to the objects and policy ofthe Act

This report shall serve as written permission for the voyage

e6 M A
FEDERAL MARITIME BOARD

No S 57 Sun No 3

STATES MARINE LINES INC WAIVER UNDER SECTION 804 OF THE

MERCHANT MARINE ACT 1936

Submitted April 26 1960 Decided May 31 1960

Special circumstances and good cause shown under section 804 of the Merchant

Marine Act 1936 as amended to permit 1

ownership and or operation

by Global Bulk l

ransport Corporation of 21 specified vessels in specified

bulk trades 2 ownership and operation by Navegacion del Pacifico of

certain Mexican flag vessels to provide lighter services at Guaymas and

La Paz Mexico 3 chartering by Isthmian Lines Inc of foreign flag

vessels for use as lighters in the Persian Gulf and 4 Global Bulk Trans

port Corporation to act as husbanding agent in the United States for

Reardon Smith Sons Ltd

Waivers will be granted under section 804 for a period of two yeats subject

to cancellation upon 90 days notice to the operator

Elkan Turk George F Galland and Robert N J ha1 asch for

applicant

lVa1 n

er lV Canlner for American President Lines Ltd Odell

Kominers for Lykes Bros Steamship Co Inc and Pacific Far East

Line Inc F1 anlc B Stone and Olaud13 R B1 eese for American Ex

port Lines Inc and Ronald A Capone for United States Lines

Company interveners

Robert Bla Jc ell as Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Jr Vice Ohairman and SIGFRID B UNANDER

Member

By THE BOARD

States Marine Lines Inc a Delaware corporation States Mar ne

orapplicant filed an application for a waiver under section 804 of

the Merchant Marine Act 1936 as amended 1

the Act or alterna

146 U S C 1222

6 F M B 71
72 FEDERAL MARITIME BOARD

tively for a finding that certain specified foreign flag vessel activit

of its associates or affiliates do not compete with any American f

service determined to be essential as provided by section 211 of t

ct Permission is sought if required for the continuance by a

iates or associates of such foreign flag activities in the event t

Board should award it an operating differential subsidy under ti

VI of the Act

Although not required the Board ordered a hearing at whichAm

ican President Lines Ltd APL Paciflc Far East Line I

PFEL Lykes Bros Steamship Co Inc Lykes United Sta

Lines Company U S Lines and American Export Lines I

Export intervened 2

I

Iearings were held and the examiner s recommended decision w

served on January 28 1960 Exceptions to the recommended decis

and replies thereto were filed and oral argument was heard Exce

tions and proposed findings not discussed in this report nor reflec

in our findings have been considered and found not justified by 

facts ornot related to material issues in thisproceeding

Section 804 of the Act provides as follos

It shall be unlawful for any contractor receiving an operating differen

subsidy under title VIol forany charterer of vessels under title VII of thisA

or any holding company subsidiary affiliate or as odate of such contracto

such charterer or any officer director agent or executive thereof directly 

indirectly to own charter act as agent or broker for or operate any fore

flag vessel whieh competes with any American Hag service determined by 

Commission to be essential as provitlecl in section 211 of this Act Provided h

evct rIwt under special circumstances and forgood cause shown the Commiss

may in its discretion waive the provisions of this section as to any contrac

for a specific period of time by affirmative vote of four of its members excep

otherwise provided insection 201 a

The foreign flag vessels wh ch applicanfs assoeiates 3

propose 

own charter act as agent 01 broker for or operate are as follows

A Global Bull vessels

1 Six Norwegian flag combination ore carriers and tankers 4

operate a in world wide trade carrying petroleum and its produ

in bulk b in world wide trade not in the foreign commerce of 

United States carrying various types of ore in bulk and c fr

Canada Liberia Brazil Chile Peru and Venezuela to United Sta

2 l he Joint Committee for American flag Tankers also requested leave to intervene 

did lIot appear nor further partiCipate In the proceeding

a

The uHsocia te status of Global Bulk rransportCorporation Navegacion del Pa

Mexico and Ifthmian Lines Inc was conceded by States Murine and is not 

tro crtcd

1lIV Bnmi ill 23 870 DWT MV FJnd1llo 23 870 DWT 88 Chatcallgay 23 860 D

SS Mois ic BOJ

2 3 950 DWT l S Free Stctte 29 050 DWT 88 Cuyahoga 29 050 DW

6 l M 
STATES MARINE LINES INC SEC 804 WAIVER 73

Atlantic and Gulf ports carrying iron ore in bulk and from Brazil to

United States Atlanticand Gulf ports carrying manganese ore in bulk

2 Five Liberian flag ore carriers 5

to operate a in world wide

trade not in the foreign commerce of the United States carrying

various types of ore in bulk and b from Canada Liberia Brazil

Chile Peru and Venezuela to United States Atlantic and Gulf ports

carrying iron ore in bulk and from Brazil to United States Atlantic

and Gulfports carrying manganese ore inbulk

3 Two Norwegian flag ore carriers appr 18 000 D VT 6to operate

a in world wide trade not in the foreign commerce of the United

States carrying various types of ore in bulk and b from Canada

Liberia Brazil Chile Peru and Venezuela to United States Atlantic

and Gulf ports carrying iron ore in bulk and from Brazil to United

States Atlanticand Gulf ports carrying manganese orein bulk

4 Three Norwegian flag ore carriers 7

to operate a in world wide

trade not in the foreign commerce ofthe United States carrying vari

ous types of ore in bulk and b from Canada Liberia Brazil Chile

Peru and Venezuela to United States Atlantic and Gulf ports carry

ing iron ore in bulk and from Brazil to United States Atlantic and

Gulf ports carrying manganese ore in bulk and c from Jamaica

BW I to United States Gulf ports carrying bauxite in bulk occasion

ally carrying supplies and equipment to and from Baton Rouge and

Gramercy Louisiana and mining installations in Jamaica

5 Two Norwegian ftag orecarriers appr 35 000 DWT 8

to operate

a in world wide trade not in the foreign commerce of the United

States carrying various types of ore in bulk and b from Canada

Liberia Brazil Chile Peru and Venezuela to United States Atlantic

and Gulf ports carrying iron ore in bulk and from Brazil to United

States Atlanticand Gulf ports carrying manganese ore in bulk

6 One Norwegian flag combination ore carrier and tanker 9

to

operate a in world wide trade carrying petroleum and its products

in bulk b in world wide trade not in the foreign commerce of the

United States carrying various types of ore in bulk and c from

Canada Liberia Brazil Chile Peru and Venezuela to United States

Atlantic and Gulf ports carrying iron ore in bulk and from Brazil to

United States Atlanticand Gulfports carrying manganese ore inbulk

7 One Norwegian flag converted Liberty ship 10 to operate in

G 80S Rio Caloni 35 462 OWT S8 Rio Mac l1 eo 35 412 OWT IS8 Rio Orinoco 35 412

OWT 88 Rio Manamo 35 412 OWT S8 Rio Barima 35 412 OWT

6

MV Cerro Bolivar 18 650 OWT MV Cerro Altamira 18 750 OWT

788 Ba1lmare 34 970 OWT 88 Baune 34 9710 OWT 88 Bauta 34 970 OWT

s

88 Sigvik 35 393 OWT 88 Sigbo1g 35 400 OWT

II S8 Sjoa 31 798 OW

10 SS Sokna 10 800 DWT

6 F M B
74 FEDERAL MARITIME BOARD

service from Cuba to United States Gulf ports carrying cobalt a

nickel slurry in bulk from United StatesGulf ports to Cuba carryi

molten sulphur in bulk and liquefied petroleum gas in pressuriz

tanks and from United States Gulf ports to Moa Bay Cuba carryi

supplies lorthe miningand loading installation at l10a Bay

8 One Norwegian flag tanker 11 to operate in world wide tra

carrying petroleum andits products in bulk

Applicant also requests that any waiver granted include permiss

to the companies operating the 19 vessels described in paragraphs 

through 6 to charter substitute orsupplementary vessels either Am

ican flag or foreign flag to operate in the trades named carryi

the named bulk ore cnrgoes

B NavegaciondelPacifico Mexico vessels

1 One riverboat

2 Six wooden lighters

3 Two Sea lluletype tugs

These vessels are used to provide lighter serVIce to vessels 

Guaymas andLaPaz Mexico

O st7vmian Lines ne vessels

1 Aforeign flag vessel to be time chartered for use as a lighter s

in the Persian Gulf

The record shows that American flag services had carried u

recently some and was still carrying other types of cargo now carr

by the foreign flag vessels which are described in the applicati

Iron ore moves in parcelloads Inthe heaviest movement from Ch

it is used by liners as bottom cargo In 1958 American flag lin

carried 10 percent of the movement Bauxite was cartied by one 

the interveners in 1956 Small loads moved on liners in 1957 in 

described trades n1anganese ore moves in from Chile In 1

American Hag liners carried 1 percent ofthe movement Some co

petition for Brazilian manganese ore comes from India ore Man

nese ore is carried regularly from South and East Africa to Gulf a

Atlanticcoast ports in liners

Quantities of ore from competing areas were shown The impor

tion of iron ore has increased about six fold from 1947 to 1959 Ba

ite ore imports are now about 8 000 000 tons a

year Manganese 

now is imported at the rate of 2 000 000 tons a

year Reference w

made to bidding for iron ore cargoes The daily cost of operat

various types of competing tankers was described The records sh

that United States flag liner vessels operating on essential trade rou

11 SS Sigdal 33 320 DWT

6 F M 
STATES MARINE LINES INC SEC 804 WAIVER 75

participate to some extent in carrying ores inbound to fill out their

vessels

Petroleum products of the type carried by Global Bulk vessels

appear to be in far less competition with essential American flag serv

ice although there was evidence that to the extent that lubrication oil

a nd asphalt are carried there may be some liner competition No

other bulk cargo such asgrain will be carried by these vessels

There are two oil ore bulk special purpose vessels eight dry bulk ore

carriers and one intercoastal coal carrier under United States registry

amounting to 4 percent of the world fleet of dry bulk carriers The

eight ore carriers are owned by one steel company subsidiary There

thus appear to be very fewAmerican flag vessels exclusive oftankers

carrying petroleum products engaged in carrying these cargoes in

bulk lots

DISCUSSION

The principaJ issues are

1 the existence of competition between foreign flag vessels

and essentialAlnerican fIag

service and

2 the presence of special circumstances and a showing of

good eause for a yaiver of the 804 prohibition

Ve find that there is competition within the meaning of section

804 The section opposes foreign flag vessels and American

flag service The testimony disclosed fe y American flag vessels

ofthe type bulk cargo applicant seeks to operate Alack ofAmer

ican flag vessels of this type does not preclude a

finding of com

petition with American

ftag service under section 804 The term

service embraces much more than vessels it includes the scope

regularity and probable permanency of the operation the route

covered the traffic handled the support givenby the shipping public

and other factors which concenl the bona fide character of the

openttion

The record disclosed that there is availa ble transportation service

by AmericaJl ftag vessels to carry from time to time the same products

to and from the same areS as proposed by applicants The service

does llot have to be identic tl if the same products are carried to

and from the same areas Indeed section 804 requires only that

the American flag service be determined to be essential under sec

tion 211 of the Act Ore is carried in American flag service liners

as bottom cargo Petrolemn is carried in the deep

tanks of the C 3

or iariner type of ship with a capacity of about 2 800 tons In

bulk oil shipments known as parcel trade special types of oils

vegetable oil lubricating oils etc are carried in liner deep tanks

6 F l1B
76 FEDERAL MARITIME BOARD

Bulk cargo in specialized vessels may compete with liner serv

Carryings by liners of such hulk cargoes wereshown to be infrequ

however

Under section 804 we are concerned with the existence not 

degree of competition The fact that there is no harm at this t

to the particular interveners or that some of them do not obj 

or that other carriers failed to intervene is immaterial The 

of vessel to vessel competition is equally immaterial Our resp

sibility is to discover the existence or nonexistence of foreign 

vessel competition with essential American flag service We 

that these vessels would he competing with service found to be es

tial under section 211 Having so found a waiver is requ

under section 804 if the activities are to he continued and Sta

Marine enters into a subsidy contract Applicant seeks to create 

inference of lack of competition from the fact that there were 

other interveners This shows only lack of interest in the outco

of this hearing Our responsibility exists regardless of any 

of interest and conclusions premised on the default of others 

not be reaohed

A decision about the propriety of removing the prohibition 

waiver requires a study of the purposes sought to be accomplis

by the prohibition

The legislative history of section 804 shows that Congress wasc

cerned lest subsidy money to be paid to support foreign ve

activities detrimental to American flag service 12 The forerun

of the present Act was first proposed by the President in a mess

to the Congress dated March 4 1935 tra IL3mitting Views and T

Reports on Subject of Adequate Merchant Nlarine 13 One ofth

the General Report of the Postmaster General dated January 

1935 stated Too many of the contractors operators under oc

mail contracts have diverted these grants or subsidies or by w

ever name this aid may be called to other than sound shipp

operations Some of the contractors up to this very ti

have their principal interest in foreign flag ships and have dive

millions of dollars of mail pay into foreign flag operations 14

A remedial provision wasproposed as follows 15

1

S Rept 898 74th Cong 1st sess pages lJ6 43

13 Hearings before the Committee on lerchllnt Marine and Fisheries House of R

sentllrtives 74th Cong 1st sess on HR 7521 To Develop an AmericaIll Mer

Marine page 1093 H Doc 118 74th Cong 1st sess

u

Id pages 109 5 1103

IS 79 Congo Rec 10125

6 F M 
STATES MARINE LINES INC SEC 804 WAIVER 77

No contractor under a contract in force under this title or any subsidiary

bolding or affiliate company connected with or directly or indirectly con

trolling or controlled by such contractor or any officer or director of such

contractor or cQmpany shall own operate charter or act as agent for foreign

vessels or foreign interests unless permission is first obtained form the

Authority inaccordance with rules and regulations prescribed by the Authority

Congressman Ioran speaking against the bill said Under this

section 534 b later 804 the authority has discretionary power to

permit an operator to use foreign flag ships The expenditure of

American taxpayers money to aid in operating foreign ships certainly

will not build an American merchant marine 16 In other words

payments for the program would be ineffective He moved to strike

the words unless permission is first obtained from the Authority

in accordance with rules and regulations prescribed by the Author

ity 17 Congressman Bland responded by saying that there

are conditions that we cannot meet in legislation They have

to be left to the maritime authority and this vests them with discre

tionary authority The Congressman also gave examples of the

conditions which could not be met

We are not in favor of the use of foreign ships but there are conditions that

arise sometimes in connection with the operation of certain lines where there

are not sufficient vessels at this time of the proper draft to serve the purpose

and until the purpose can be accomplished to have those ships that is ships

with the proper draft feeder line types permission is given to the maritime au

thority to grant permission under these very limited circumstances

Is

The motion wasdefeated

Against thisbackground of legislative interpretation of section 804

we have concluded that the primary purpose of the section was to

prevent contractors receiving operating differential subsidies from

paying their associates and affiliates for services involving the use of

foreign flag vessels which compete with American flag services The

purpose was to stop the use of foreign flag vessels which compete with

American flag service unless it could be shown that subsidy payments

would not be affected by their operation or that there was no competi

tion As shown by the defeat ofthe amendment the purpose was not

to prohibit the use of foreign flag vessels In the light of such

congressional action we will not prohibit the use of foreign flag

vessels either by refusing to grant waivers where the applicant can

show special circumstances andgood cause

Authority to waive the prohibition was given a under special

circumstances and b for good cause shown The Act also required

le Id page 10094

11 rd page 108

8Id page 101082

6 F M B
78 FEDERAL MARITIME BOARD

an affirmative vote of four of the five members of the agency

19 w

for ordinary matters only three votes were sufficient and that 

waiver be for a

specified period of time thereby assuring a

perio

reexamination of circumstances These requirements point to rest

tive policy in granting waivers There appears to be no legislat

history as to the meaning of the phrase under special circumstan

and for good cause The restrictions therefore call for the exerc

of the Board s discretion consistent ith the declaration of po

of the Act

Enough has been said however to indicate 1 that a special 

cumstance exists where a the proposed foreign flag vessel use Y

not adversely affect subsidy payments or the subsidized service a

b the applicant would suffer a hardship if the prohibition is 

forced and 2 that good cause is shown a if the proposed ve

use will have an insignificictnt effect on Ameliean flng service h 

ownership or operation of the vessels under United States regis

by citizens is not practicable and c there is an insufficiency 

American flag vessels of the right t

ype to serve the purpose Ot

special circumstances and good causes mny exist The present ap

cation presents these particular factors

1 There is a relative flbsence of competition between the 

vessels and essential American Hag service Berth liner services 

not compete e

ffectively with the large specia 1ized bulk ore a

petroleum vessels named herein

2 The named vessols are engaged in enrlying raw mater

that are vitetl to American industry

3 Global Bulk is operating the vessels under

long te rm c

tracts made prior to October 1 1959 the date of the application v

importers who require long term stable transportation

4 As a result of using the ore vessels sl1hstnntial savings 

achieved which are important to American industry

5 Successful operation of American

ftng bulk carrier vess

on these routes would require f1 n

opel at ing clifferential subsidy wh

is not now being prmrided

6 IfGlobal Bulk does not continue to control the operation 

the vessels they will have to forego valuable bw iness a1Tangemen

7 There is an insufficiency of Americfl n flag

vessels for th

purposes

0 Act sec 804 By Reorganization Plan No 21 of 1950 64 Stat 1273 excep

otherwise provided in the Plan the functions of the United States Maritime Commis

and of its Chairman were transferred to the Secretary of Commerce The functio

approving waivers under section 804 was not excepted and was subdelegated to the Ad

Istrator of the Maritime Administration

6 D M 
STATES MARINE LINES INC SEC 8 0 4 WAIVER 79

8 The record shows that the foreign flag operations would have

an insignificant effect onAmerican flag service and

9 Global Bulk was organized as a business entity separate from

applicant to meet requirements for a

separation of foreign flag

activities from its requested subsidized operations The Act pro

hibits any diversion of subsidy payments to meet costs or expenses

ofGlobal Bulle s operation

The next major classification of vessels for which a waiver is sought

involves a fleet unspecified as to number or vessel name of foreign

flag vessels Global Bulk or its predecessor organizations has 0

been agent since 1931 for Sir vVilliam Reardon Smith Sons Ltd

of Cardiff vVales which operates a fleet of British flag tramp vessels

in world wide full cargo trading The agency services performed

are the husbanding and handling of vessels during loading and

discharging of cargoes that are fixed by the owners in London Such

services do not involve any cargo solicitation and are confined to

the mechanics of servicing ships in port

As special circumstances applicants presented

1 The agency began in 1931 has continued without interrup

tion and is confined to husbanding activities

2 Smith provides general agency services to States Marine and

to Global Bulk ships in Europe The existing agency helps retain

these services and maintain European contacts As such it is a

valued connection Smith supervises the port agents and handles

accounts with them in Europe In the United IGngdom it acts as

berth agent in soliciting and booking cargo

The remaining classifications of vessels for which a waiver is sought

apply to the vessels operated by N avegacion and those operated by

Isthmian Applicant showed as to these

1 Navegacion

a Lighterage services are necessary for the use of the port by

applican ts vessels

b The lighterage servicesare purely local

f2 Isthmian

a Charter of a British flag vessel as a

lighter ship in tJhe Persian

Gulf reduced delays in port and brought about an average saving

of over 14 days in turnaround time The ship has beeJ 1 returned but

may be needed again ifport congestion recurs

b The lighterage services are essentially local

No evidence was presented no charge was made and we have no

right to assume that unsubsidized associates will be milking the sub

sidized applicant through high charges for services under contracts

6 F M B
80 FEDERAL MARITIME BOARD

not negotiated in arms length dealing These are the basic evils 

tion 804 sought to prohibit

It has been suggested by interveners that they may inquire 

the foreign flag vessel operation of any other associates not na

in the application We deal only with the application which has 

presented to the Board that is only to those matters specifically 

quested in the application and noticed for hearing If there 

other situations covered by section 804 and nowaiver is granted 

the provisions of that section will be applicable

Ithas been argued that the Smith agency should not be allowe

continue on the basis of American Export Lines Ino Section 

Waiver 4 MA 379 1954

That decision applied the prohibition in section 804 by refu

to grant a waiver because Export and the foreign operator agent 

competitors in substantially parallel services American Export 

a

passenger soliciting agent for Italian Line The facts in that 

are quite lifferent from the situation we have before us where 

owner of the vessels does its own solicitation and makes its own b

ings and calls on the agency for clerical mechanical orhousekee

services when the vessel is in a United States port Our action 

is consistent with the past practice of granting waivers for husb

ing agencies 20

During the hearing it developed that applicant s associate N

gacion used a personnel launch in operations at the lexican p

as an incident of lighterage activities The launch wasnot name

the application Applicant has asked for a waiver with respe

the launch Since section 804 does not require a hearing we 

act on such request outside the scope of this proceeding and gran

waiver followingthe prior practice in other similar cases

CONCLUSIONS

Ve have concluded that the vessels named in this application 

pete with essential American flag service because many of the 

modities carried and the areas served have involved American 

service American flag service of the liner type is in compet

on essential trade routes with foreign flag vessels providing 

service Consequently the prohibitions of section 804 are in e

as to applicant and the vessels controlled by its associate Global B

The prohibitions have also been found to apply to the husban

m

On of th intervenors had continuing waivers since 1940 to act as husbanding 

for foreign flag nonl1ner operators and a blanket waiver to act as agent for any fo

flag tramp vesseL See exhibits 3 4 and 5

6 F M
STATES MARINE LINES INC SEC 804 WAIVER 81

activities of Global Bulk to the services performed by the foreign

flag vessels owned by Navegacion and to the services to be performed

by the foreign flag vessel chartered by Isthmian

The record disclosed 1 that the proposed foreign flag vessel use

would not adversely affect subsidy payments or the subsidized serv

ice 2 that applicant would suffer a hardship through a disruption

of long standing business arrangements ifthe prohibition is enforced

3 that the proposed foreign flag vessel use would have an insignifi

cant effect on American flag service determined to be essential 4

that ownership and operation of the vessels under United States

registry is not practicable because of the absence at this time of

operating differential subsidies and 5 that there is an insufficiency

of American flag vessels of the right type to serve the purpose of

economical bulk carriage ofraw materials vital to American industry

For these reasons we have concluded that under special circumstances

and for good cause shown a waiver of the prohibition of section 804

should be granted as to the foreign flag vessels operated by Global

BuIlL

The record further disclosed that the husbanding agency involved

limited noncompetitive activities had existed for a long time and was

a valuable business connection The two lighterage service opera

tions of Navegacion and Isthmian were both necessary to the efficient

use of port facilities and were local in nature having a minimum

competitive effect IIere too we have concluded that under special

circumstances and for good cause shown a waiver of the prohibitions

of section 804 should be granted as to the foreign flag vessels hus

banded by Global Bulk and owned operated or chartered by Nave

gacion and Isthmian

Vaivers will be granted covering the above vessels and the specified

services oractivities in the particular trades for a period of two years

subject to cancellation upon ninety days notice to the operator thereof

These waivers will include permission to the companies operating the

vessels to charter American flag vessels or foreign flag vessels as sub

stitute vessels Permission to use supplementary vessels must be

applied for on an individual basis

6 F M B
FEDERAL MARITIME BOARD

No S 113

GRACELIN INC CONTRACT MODIli ICATION ROUTE 33

Su1JmUte l June 9 1960 Decide l July 14 1960

Application by Grace Line Inc for modification of Contract FMB 49 u

section 606 4 of the Merchant Marine Act 1986 denied but relie

quested is granted under specified condition

Maritime Administrator requested to review essentiality of Trade Route Xo 

OdellKornine1s for Grace Line Inc

Oarl S Rowe for Committee of American Steamship Lines

Louis Zi111 met and John E Cograve as Public Counsel

REPORT OJ THE BOARD

TROS E STAKEM Jr Vice Ohairman and SlGFRlO B UNAND

Member

By THE BOARD

Grace Line Inc Graee a Delaware corporation filed an app

tion pursuant to section 606 4 of the Merchant Marine Ad 1

as amended the Act and to Article 11 32 of Operating Differen

Subsidy Agreement Contract No FMB 49 dated January 17 1

as amended the contract between uhe United States and Gr

requesting a modifieation of the eontraet and a reeision of its 

visions obligating Grace each year during the period of the ag

ment to maintain and operate vessels on the berth service designa

Line D Trade Route No 33 Great Lakes Caribbean the rou

The application claims that Graee cannot maintain and operate 

vessels on the route with a reasonable profit on its investment G

claims a loss of 1 657 000 in this service in 1959 and forecasts a 

of not less than 120 000 per voyage in 1960 plus pro rata of bll

and lay up costs of about 250 000 for two vessels for such sea

Public Counsel responded with the contention that 1 un

normal circumstanees the service could be condueted at a pro

82

6 FM 
GRACE LINE INC CONTRACT MODIFICATION ROUTE 33 83

and 2 the petition for relief vould force the Board into an un

natural construction of Sec 606 4 in that the claim is not proved

unless a no reasonable profit is shown in the investment on all

service3 routes and lines covered by the contract not just Trade

Route No 83 b a

longer period of profit experience has elapsed

particularJy

since a profit is foreseeable if Maritime Administration

staff estimates are used and c all other rights in section 606 have

been used The issues vere presented by briefs The Committee

of American Steamship Lines responded with a memorandum op

posing contention 2 a Grace resP onded to all of the above con

teritions by brief and affidavits Oral argument was heard at the

conclusion of virhich we decIa red the proceeding had been submitted

for final decjsion pursuant to Rllle 14b of the Board s Rules of

Practic and Procedure with the exception ofthe answers to questions

which 1embeL Unander had asked The answers and Grace s

memorandtim in coi1nection therewith have been reviewed The

resultant issues resolve therhselves into a

controversy over 1 the

future profit prospects on the route and 2 the interpretation of

section 606 4 Public Counsel submitted a further Supplemental

Data Submission in a memarandunl of June 15 1960 which in

essence estimates that a

carriage of 8 006 revenue tons outbound on

one pO day roundvoyage at the rate of 38 00 per ton will produce a net

prpfit per voyage of 75 838 Grace responded further with a

reply

dated June 17 1960 denying the validity of these estimates The

full record of the case is conta ined in the hearings briefs and sup

portig affidavits and meillorancla

We hav decided tha in passing on Grace s application and claim

we mu t t ke into considerati9n the Pl Ofit projectioil and experiepce

upder he entir operating diff Tentiair subsidy contract Applicant

does not pJove its claim that it cannot 11aintain nd operate its vessels

on a service route or line with easonabJe profit on its investment

l nl ss it establishes th t

it cannot operate under the contract with a

re sonable profit upon its entire investment devoted to the performance

of the contract Since there has been no claim nor is there any evi

dence of lack of profit on investment devoted to the performance of

the contract and to the services routes or lines which are the subject

of the contract section 606 4 does not operate to establish a

right

in applicant to th requested modification of its contract Inthis view

of the case it is unnecessary to pass on the other contentions as to the

profitability of the particular route nQ as to the period over which

profitabilit r

must be deter ined Grace s entire case is premised on

the contention that the illvestment tefetred to in section 606 4

6 F MB

732 047 0 64 7
84 FEDERAL MARITIME BOARD

relates only to a specified service route or line This contentio

is rejected

For the reasons hereinafter stated however the contract will 

modified to exclude the route from the contract pursuant to the pr

visions of Article 11 33 permitting modification by mutual agreeme

if Grace agrees to the amendment on the conditions set forth herein

DISCUSSION

Section 606 4 of the Act provides as follows

Every contract for an operating differential subsidy shall provide

4 that if at any time the contractor receiving an operating differential subs

claims that he cannot maintain and operate his vessels on such service route 

line with a reasonable profit upon his investment and applies to the Commiss

for a modification or rescission of his contract to maintain such service route 

line and the Commission determines that such claim is proved the Commiss

shall modify or rescind such contract and permit the contractor to withdr

such vessels from such service route or line upon a date fixed by the Comm

sion and upon the date of such withdrawal the further payment of the operati

differential subsidy shall cease and the contracto be discharged from any furth

obligation under such contlact

The words such service route or line when first used in sub

vision 4 refer back to subdivision 3 which provides that if t

Commission shall determine that a change in the service route or li

receiving an operating differential subsidy under this title is necess

in the accomplishment of the purposes of the Act it may make su

change upon readjusting the amount ofsubsidy

Section 211 of the Act clearly indicates that the Act contemplat

contracts covering American flag service on routes and lines wh

may not be profitable Such American flag service could not be o

tained if section 606 4 were interpreted as granting relief when 

reasonable profit cannot be made on one particular trade route St

utes such as the Act must be construed in a

way that gives meaning 

the over all policy sought to be achieved Each section must be re

as a reflection of congressional intention to fit that section into t

over all objective of the statute in order to make an harmonious who

Congress did not intend to guarantee a subsidized operator a profit 

each trade route nor on the whole contract for that matter Grac

construction of section 606 4 would put that section at odds with 

policy of Congress and out of harmony with other provisions of 

Act

Section 211 a and b ofthe Act provides as follows

The Commission is authorized and directed to investigate determine and k

current records of

6 F M B
GRACE LINE INC CONTRACT MODIFICATION ROUTE 33 85

a 1be ocean services routes and lines from ports in the United States or

in a Territory district orpossession thereof to foreign markets which are or

may be determined by the Commission to be essential for the promotion develop

ment expansion and maintenance of the foreign conunerce of the United States

and in reaching its determination the Oom1ni8 ion 5hall con 5ider anll Iive llue

weight to the cost of ma inta i1Jing each of 8uch 8tearntoJh ip lines the probability

that any 8uch Une cannot be maintained el eept at aheavy 1088 U8p roportionatc

to the benefit accruing to Im cign t1 acle the number of sailings and types of ves

sels that should be employed in such lines and any other facts and conditious

that a p11ulent b1tsines8 ntanW01tlll consider When denling with his own bltsiness

wUh the addell considerat ion however of the intangible benefit the 11 ltintenance

of any such line may offorcl to the foreign comrne rce of the Unitel States and to

the national defense

b The type size speed and other requirements of the vessels including

express liner or super liner vessels which should be employed in such services

or on such routes or lines and the frequency and regularity of the sailings of

such vessels witha view to f1t rni ldng alleqllate regular cm tain and pennanent

service II Italics supplied

The plain meaning of the above quoted language is that a service 01

route may be determined to be essential even though operation there

on will result in substantial losses if such losses are not disproportion

ate to the benefits accruing to the foreign commerce of the Uilited

States from such operation Also in determining what is an essential

service route or line consideration is to be gi ven to the intangible

benefit the maintenance of any such line may afford to the foreign

commerce of theUnited States and to the national defense

If an operator has the right under the Act to discontinue a serv ce

route or line upon a

showing that he could not make a reasonable

profit upon his investment in such service route or line even thO lgh

he could make a reasonable profit on his investment under the entire

contract the Act would provide no way of carrying out the foregoing

purposes Itmust be presumed that the provisions of the Act were in

tended to provide some way to accomplish the objectives thereof

The words upon his investment in section 606 4 should be con

strued to mean upon the investment under the entire operating

differential subsidy contract Section 606 4 provides for relief if the

contractor establishes that he cannot maintain and operate his vessels

on such service route or line with a reasonable profit upon his invest

ment It does not say upon his investment in what To carry out

the purposes of the Act these words must be construed to mean the

investment under the entire operating differential subsidy contract

rather than the investment in the service route or line Even if the

words upon his investment refer back to service route or line

the requirement is that the contractor establish that he cannot make

a reasonable profit on his entire investment under the contract 1Ve

6 F M B
86 FEDERAL MARITIME BOARD

construe the words service route or line as services routes 

lines in seetions 601 2 and 60 a Hnd these ords should be c

strued the same yay in section HOG 4

Section 601 a of the Act al1tholizes the Board to consider 

a ppEcat ion of any itizen of the United States for financial aid 

the operation of any vessel or vessels which are to be used in an 

senUa l service in the foreign commerce of the United States S

tion 603 a provides that if the Board approves the applicatio

it mayenter into a cantract with the applicant for the payment 

an aperating differential subsidy for the operation of 

ves3cl 01 vessels in such service raute 01 line Under the

sectians the Board in carrying aut the purposes of the Act has 

terpreted the words service route or line as services routes 

lines and has therefore included in some contracts more than o

serv ice route orline

The foregoing interpretation and this way of contr cting p

mit the avenging for recapture purppses of p

rofits ald losse fr

all af the services routes and lines included i

l the contract To 

clude a1l of the operator s selvices l outes and lines in one contr

carries out the purposes of the Act in that it permits the m

profitable operations to help carry the less profitable operations a

thus assists in obtaining service on the less profitable services rou

and ines The words service route ar line shou l receive 

sa me construction in sectian 606 4 as they receive in section 601 

and 603 a and far the sa me reason

Operating differentia l subsidy qmtracts praperly GOnstrued p

vide for reiief onl if the operatar cannot make areasonable pr

on his investment pnder the entire contract Article 11 32 Part 

af the cantract is derived from sectian 606 i

of the Act Palt 

is the same for cach subsidIzed operntor Ai tlcle 11 32 is as follow

II 32 MoUfica tion 01 RescissiOrt flt Request of Ope1 a tor The operator 

at llny time make clab l to the United States that it cannot maintain 

operate the subs idized vessel s anel service s roilte sL or line s 

a reasonable profit on its investment and appiy to the Uhifed States fo

Illodification or rescission of thisagreement arid if the United States determ

that such claim of the Operator is prQved the United States sh albplOdifY 

res ind this agreement and permit the Operator to withdraw the vesse

frolll the service s route s or line s upon a date to befix d by the Un

State and upon the date of such withdrawa further paymellts heteun e

th i lliteel States shall cease and the Operator shall be discharged from 

filrther obligation tinder this agreement Such discbatge shall be withoutp

uelice to any accrued rights of the United States and the Operator herepn

The evident purpose of 8 in service s route s 0 1 line 

is to indicate that the words are in the singular if the can tractor 

6 F M 
GRACE LINE INC CONTRACT MODIFICATION ROUTE 33 87

only one service ratite at line and in the plural if he has more than

one Upcl r tll foreg oirlg article if the contractor had more than

une service route or line he would have to estabhsh that he could

1L0t make a

profit all his investment in ll of them i 11 older to be enti tIed

to relief The provisions of P l tIof the COlltl wt relating to finan

cial LCcounting and repbcCment vessels also indica te that the fore

going is the correct construction ofArticle 11 32

On the uncontroverted proofs before us Grace in 1959 on all its

subsidized services conducted under Contrac tNo FTh1B 4D including

the Tntde Ioute No 03 service realized a substantiaJ profit In

other respects its financial position appears strong Grace s proofs

established to oursatisfaction however that it has suffered and will

for the foreseeable future suffer a loss on its investment on this pal

t icula r service route or line In such circumstances and in the

absence of any objection having been received from any of the Ameri

can shippers or exporters who will be affected by the discontinuance

of such service route or jne we do not feel impelled to require the

continuation of the losses even though Grace does not have a

right

under section 606 4 to a contra tmodification to so provide Conse

quently we have reconsidered Grace s letter of March 4 1960 request

ing moclifica tion of its operating differentia subsidy contract No

F 1B 49 to discontinue the service required to be performed by it all

the route and will grant such reqnest subject to agreement by Grace

to the following conditions

1 The withdrawal of the SSs Santa AUcia Sa nta Oristina Santa Reuina

and Sant t Men edes from the operating differential subsidy agreement Contract

No In 1B 49 will be authorized effecthoe as of the last voyage of each such

vessel determined in accordance with pamgr aph No 2

2 Jfor the purpose of determining eligibility for uhsid v the final Yoya e

of each of the aforesaid vessels in aceordance with rlide Il 37 c shall he

deemed to terminate at midnight on the day of the l olllpletion of final discharge

of cargo at an authorized United States port of discharge on the route but

in no event III tel than December 31 1959

3 No expenses incurred with respect to the aforesaid four vessels indllding

but not limited to depreciation and overhead allocation for any periods subse

quent to the date of termination of the last voyage of each vessel determined

in accordance with paragraph No 2 shall be charged against subsidized opera

tions for the purpose of determining earnings subject to recapture and deposits

in the Special Reserve Fund

4 The amount of depreciation applicable to the above vessels and to the SS

81nta lfurialIa and the SS Santa rjctoria shall continue to be deposited in the

Capital Reserve Fund for periods after December 31 1959 while such vessels

are or were owned by Grace regardless of whether the same was earned and

whether the vessels were idle or under charter or otherwise engaged in non

subsidized operations and

6 F lLB
88 FEDERAL MARITIME BOARD

5 In the event of sale or other disposition of the Santa Alicia Scmta Cristi

and or Santa Regina within a period of three years from July 14 1960 as 

each such vessel the proceeds therefrom shall be deposited in the Operato

Capital Reserve Fund

vVe have requested that a review be made by the Maritime Admin

trator as to the essentiality of Trade Route No 33 as one essen

to United States commerce and defense

6 F M B
FEDERAL MARITIME BOARD

No S60 SUB No 2

IS RANDTSEN COMPANY INC WAIVER UNDER SECTION 804 OF THE

MERCHANT MAmNE ACT 1936

No S 64 SUB No 1

ISBRANDTSEN COMPANY INC WAIVER UNDER SECTION 804 OF THE

MERCHANT MAmNE ACT 1936

Submitted July 1 1960 Decided Jul 1 18 1960

Special circumstances and good cause shown to justify waiver of the provision

of section 804 of theMerchant Marine Act 1936 permitting Jakob Isbrandt

sen a director of Isbrandtsen Company Inc to retain ownership in shares

of stock of Canadian Foreign Steamship Company Limited a Btitish com

pany operating foreign flag vessels

Waivers will be granted under section 804 of the Act for a period of two years

subject to cancellation upon ninety days notice to theoperator

Richard W Kurrus for applicant

Robert J Blackwell as Public Counsel

REPORT OF THE BOARD

THOS E STAKEM JR Vice Ohairman and SIGFRID B UNANDEn

Member

By THE BOARD

We adopt the examiner s recommended decision to which no

exceptions have been filed The recommended decision is as follows

lJnder date ofApril 14 1960 Isbrandtsen Company Inc applied

for a waiver to the extent required by section 804 of the Merchant

Marine Act 1936 as amended the Act to permit the retention by

Jakob Isbrandtsen President and Director of applicant of an interest

held personally in CanadianForeign Steamship Company Limited in

the event the Board should award Isbrandtsen Company Inc oper

6 R
90 FEDERAL MARITIME BOARD

ating differential subsidies under section 601 of the Act 1

A pub

hearing was held but there were no intervenors

Section 804 of the Act provides

It shall be unlawful for any contractor receiving an operating differen

subsidy under titleVI orfor any charterer of vessels under title VII of this A

or any holding company subsidiary affiliate or associate of such contractor 

such charterer or any officer director agent or executive thereof directly 

indirectly to own charter act as agent or broker for or operate any fore

flag vessel which competes with any American flag service determined by 

Commission to be essential as provided in section 211 of this Act Provid

however That under special circumstances and for good cause shown 

Commission may in itS discretion waive the provisions of this section as 

any contractor for a specific period of time by affirmative vote of four of 

members except as otherwise provided in section 201 a

Jakob Isbrandtsen owns approximately 42 percent ofthe outsta

ing cOmmon stock and is a director of Canadian Foreign Steams

Company Limited Canforship a firm organized under the laws 

Great Britain and domiciled in Nassau With three Dutch fl

specially designed bulk earriers listed as combination ore oil carrie

of approximately 26 500 d a weight tons each bareboat chartered 

1956 for 15 years it is elga ed in the transportation of iron o

generally in lots of a minimum of 15 000 tons from the Republic 

Chile to United States Gulf and Atlantic ports and Canadian Ja

nese and European ports Its customers are the purchasers of 

ore with whom it has entered into ordinary contracts of freight 

periods up to seven years some contracts are based on daily requ

ments of the receivers To ejminate southbound voyages in ball

Canforship endeavors to carry oil it is occasionally engaged by s

shippers as Standard Oil Company All such transportation of 

has been from Venezuela or other Caribbean ports to Peru and Ch

Because oftheir lack of cubic capacity 2

the three chartered vessels 

no usable for any commodities other than ore or oil As busin

necessities arise Canforship charters other specially designed forei

flag bulk carriers When carrying ore from Chile to Canada eff

are made to bring cargoes of ore from Seven Islands Labrador 

Baltimore There are no American flag berth operators in that tra

Applicant asserts that the Canforship vessels are not compet

with any American flag vessels operating on an essential foreign tr

route simply because there are no American flag vessels of this nat

in service The competitive rates at wl ichthe ore must move are s

to be too low to allow for the operation of an American flag b

1 See Isbrandtsen Oompany Inc Subsidy EIB Round the World 5 F M B 448 

Isbrandtsen Company Inc Subsidy TIR 82 5 F M B 525

11210 000 tons of coal or grain being the maximum that could be carried

6 F M 
ISBRANDTSEN co INC SEC 804 WAIVERS 9i

carrier The ore is available however toAmerican berth services but

except on occasions when it is used as bottom cargo it is not susceptible

of carriage in liner service One such liner service is that of Grace

Line Inc the only operator of American flag vessels between United

States Atlantic ports and ports in Chile Pacific Coast of Colombia

Ecuador and Peru S A factor of importance to the person selling

the oreis the differential of25 to 50 cents per ton between the existing

bulk rate per ton in large bulk carriers of the type here considered

and the rate prevailing on a parcel lot of2 000 or 3 000 tons carried by

Grace Line Canforship has provided Grace Line with certain ores to

the limit of the latter s

requirements for discharge at United States

Atlantic and Gulf ports 4

and Mr Isbrandtsen has been told by

representatives of Grace Line that they do not object to the continu

ance ofthe Canforship operations

Isbrandtsen Company Inc has no direct legal interest in Can

forship and would obtain no direct financial benefit if the requested

waiver be granted Certain indirect benefits might accrue to the

extent that knowledge of the costs of operating foreign flag vessels

could aid in establishing efficiencies in operation of American flag

vessels Mr Isbrandtsen further testified that the grant or denial

of this application would not affect the ability of any American flag

vessels to carry ore or oil as described in the application that it

would not be possible for him to dispose of his interest in Canforship

except at a rather substantial financial sacrifice and that even if

this were done the situation with respect to American flag vessels

would not be altered in any respect Foreign flag bulk carriers would

continue to carry the ore at world market rates In support of

special circumstances and for good cause for granting the waiver

the applicant states that Mr Isbrandtsen will hold no office nor

will he act as director of Canadian Foreign Stea mship Company

Limited

DIsCUSSION

Applicant s position is that a waiver for the operation described

is not necessary under section 804 of the Act because

1 The specially designed hulk carriers operated by Can

forship aTe not competitive with any American flag service that

sReview 01 Grace Line Subsidy Route 2 4 FM B 40 42

The only American flag operator from Chile to United States Gulf ports is the Gulf

and South American Steamship Co Inc a corporation owned in equal proportions by

W R Grace Co and Lykes Bros Steamship Company See Gulf and South American

Steamship Co Inc Application Under Section 605 cL Merchant Marine Act 5 FM B

747 decided December 16 1959 Grace Line also operates a berth service from Chilean

ports to United States Pacific Coast ports See Grace Line Inc Sttbsidy Route 25 4 F M B

549 but to the knOWledge of applicant s president there is no movement of liner parcels

of bulk ore on Grace Line vessels or on any other vessels to such destinations

6 F MB
92 FEDERAL MARITIME BOARD

has heel determined to be essential under section 211 of the A

2 The only berth operator from Chile to the United Sta

is the Grace Line and all of the bulk cargoes that Grace Li

desires are made available to it by Canforship

3 The movement of ore from Chile to the United Sta

and Canada is by economic necessity forced to move on foreig

flag ships

4 As there are no American flag vessels operating in 

ore trade from Labrador to Baltimore there are no such vess

operating within the meaning ofthe essential foreign trade ro

concept

5 Similarly there are no American flag vessels operat

in the trade between Caribbean ports and Peru and Chile

If however a waiver should be deemed essential applicant s

mits that this is a situation involving special circumstances and go

cause as the particular cargoes have to move by foreign flag vess

or not move at an These bulk eargoes are obviously important 

the national economy and security and it is also important 

the national security that some control of these large vessels sho

he in the hands of American citizens Furthermore granting 

waiver and allowing Mr Isbrandtsen s interest to continue wou

necessarily limit the operations of Canforship to what is conte

plated by section 804

P blic Counsel agrees that no waiver is required under section 8

for the reasons first the oil movement described is not in the fore

commerce of the United States and therefore can not be consider

to be a route determined by the Maritime Administrator to be ess

tial under section 211 of theAct Secondly while Grace Line ser

the trade between Chile and United States Gulf and Atlantic po

and does carry some quantities of ore its failure to oppose the app

cation indicates lack of competition The discrepancy between 

rates of the two types of carriers also indicates that the operat

of Canforship is not competitive with the American flag vessels off

ing berth service and carrying ore in the Chilean United States tra

routes Ifcompetition be found though it is the view of Pub

Counsel that special circumstances and good cause constituting ju

fication for waiver have not been shown

Certain findings of the Board in States Marine Lines Inc Waiv

Under Section 804 Me chant Marine Act 1936 6 FM B 71 

cided May 31 1960 are equally appropriate here Thus A lack 

American flag vessels of this type bulk cargo does not preclu

a

finding of competition with American flag service under sect

804 The service does not have to be identical if the sa

6 F M

J
ISBRANDTSEN co INC SEC 804 WAIVERS 93

products are carried to and from the same area Ore is carried

in American flag service liners as bottom cargo Bulk cargo

in specialized vessels may compete with liner services Under

section 804 we are concerned with the existence not the degree of

competition The fact that other carriers failed to in

tervene is inunaterial Our responsibility is to discover the

existence or nonexistence of foreign Jlag vessel competition with es

sential American flag service vVe find that these bulk cargo ves

sels would be competing with service found to be essential under

section 211 Having so found a waiver is required under section

804 if the activities are to be continued and applicant enters into

a subsidy contract Applicant seeks to create an inference of lack

of competition from the fact that there were no other intervenors

This shows only lack of interest in the outcome of this hearing

Our responsibility exists regardless of any lack of interest and con

clusions premised on the default of others will not be reached See

sheets 6 and 7 of multilithed report served June 1 1960

After a discussion of the legislative history of section 804 the

Board said at sheet 9

Enough has been said however to indicate 1 that a special circumstance

exists where a the proposed foreign flag vessel use will not adversely atfect

subsidy payments or the subsidized service and b the Applicant would suffer

a hardship ifthe prohibition is enforced and 2 that good cause is shown a

if the proposed vessel use will have an insignificant effect on American flag

service b if ownership or operation of the vessels under the United States

registry by citizens is not practicable and c there is an insufficiency of

American flag vessels of the right type to serve the purpose Other special cir

cumstances and good causes may exist

As detailed above the following appear as factors for considera

tion comparable with those recognized in the recent States Marine

Lines decision

1 There is a relative absence of competition between the

three Dutch flag vessels under charter to Canforship and essential

American flag service Berth liner services do not compete ef

fectively with the large specia Iized bulk ore and oil carrying

vessels described herein

2 The three specialized foreign flag vessels are engaged in

carrying raw materials that are vital to American industry

3 Canforship is operating the vessels under long term con

tracts made prior to April 14 1960 the date of the application

with importers who require long term stable transportation

4 As a result of using the ore vessels substantial savings

are achieved which are important to American industry

6 F M B
94 FEDERAL MARITIME BOARD

5 There is an insufficiency of American flag berth vess

to carryall of the ore moved by Canforship from Chile to 

United States

6 The foreign flag operations of Canforship described 

record have an insignificant effect on American flag service

CONCL USIONB

Conformable with the decision in States Marine Lines Inc

Waiver supra it is concluded that the three vessels of Canad

Foreign Steamship Company Limited as described herein comp

with essential American flag service American flag service of 

liner type is in competition on essential trade routes with foreign f

vessels providing bulk service Consequently the prohibitions of s

tion 804 are in effect as to the applicant and the vessels control

by Canadian Foreign Steanlship Company Limited in which 

president and director of applicant holds a minority hut substan

interest

The record discloses 1 that the continued holding by Ja

Isblandtsen of his personal interest in Canadian Foreign Steams

Company Limited would not adversely affect subsidy payments 

the subsidized service 2 that applicant s president would suffe

hardship through the sacrifice of personal holdings ifthe prohibit

is enforced 3 that the con tinued foreign flag vessel use by Canad

Foreign Steamship Company Limited would have an insignific

effect on American flag service detennined to be essential and 

there is an insufficiency of American flag vessels of the right t

to serve the purpose of economical bulk carriage of raw mater

vital to American industry

Upon the record in thi proceeding 1 we conclude that the th

vessels of Canadian Foreign Steamship Company Limited as 

scribed in the examiner s recommended decision compete with es

tial American flag service and 2 we find that special circumstan

and good cause have been shown justifying waiver of the provisi

of section 804 of the Act with respect to the continued holding 

Jakob Isbrandtsen of his personal stock in Canadian Foreign Ste

ship Company Limited

Awaiver will be granted covering the ownership by Jakob Isbra

sen of shares of stock in Canadian Foreign Steamship Comp

Limited for a period of two years subject to cancellation u

ninety days notice

6 F M 
FEDERAL lIARITIME BOARD

ORDER

At aSession ofthe FEDERAL MARITIME BOARD held at its

office inWashington D C on the 29thday ofJuly AD 1960

No 878

AMERICAN PRESIDENT LINES LTn LJPLICATION UNDER SECTION

805 a MERCHANT MARINE ACT 1936

On May 18 1960 American President Lines Ltd APL filed a

petition requesting the Board to reconsider and revise its report and

decision herein of April 28 1960 6 F MB 6 insofar as it

limits so called grandfather rights under the proviso of section

805 a of the Merchant Marine Act 1936 the Act to 2 852 passen

gers and 3 204 LIT of cargo ayear and not in excess of 26 round

voyages Itsays in effect that this is not substantial parity because

it does not permit APL to maintain its position or to grow with the

trade APL cites the fact that the trade has more than doubled

since 1935 The total of all passengers west and east in 1935 was

38 588 and in 1957 the last fullyear for which figures are available

it was76 129

Matson Navigation Company Matson replied that Rule 16 of the

Board s Rules of Practice and Procedure which gives the right to file

such a petition authorizes reopened proceedings only if the Board

finds such action is required by changed conditions in fact or law or

by the public interest and that the petition contains no information

which would permit such a finding Inview ofthe importance of such

rights under the proviso of section 805 a oftheAct as it affects the

California Hawaii trade and the significance of the question as to

whether the growth with the trade is applicable under that section

to the extent urged by APL we decided to hear oral argument in the

1 8ee appendix

95

6 F MB
96 FEDERAL MARITIME BOARD

matter On June 15 1960 we gave notice of and ordered oral arg

ment which washeard on June 21 1960

The purpose of this report is to respond exclusively to the petiti

for a reconsideration of our original report relative to the scope 

APL s so called grandfather rights under the proviso in sect

805 a of the Act These proceedings and this report are limited 

this issue

Under theproviso the rights as distinguished from permission

to participate in the intercoastal trade arises by virtue of the operato

activities in 1935 and since it constitutes an exception to the necess

of meeting the conditions prescribed by section 805 a must not 

enlarged by a liberal construction of the statute Activities in exc

of such right may be authorized but only in accordance with the 

quirements of the other parts of section 805 under which we m

consider problems of unfair competition and the objects and polic

ofthe Act

FACTS

The status of APL in 1935 duringthe season ordinarily covered 

its operation wasas follows

1 Aline known as Dollar Steamship Line Inc Ltd had a Tra

Pacific Service which used two vessels the President Hoover and 

President Ooolidge operating Los Angeles San Francisco to IIon

lulu Yokohama Kobe Shanghai Hongl

ong 1anila and returni

overthe same route to California

2 Dollar Steamship Line also had a New York to Manila 

Panama Canal and return service which used five vessels the Pre

dent s Lincoln Oleveland Pierce Taft and Wilson operating L

Angeles San Francisco to Honolulu and the same ports served by 

Trans Pacific Service and return the same way to New York a

Boston

3 The Hoover and the Ooolidge at regular intervals duringthe y

departed 13 times from California for Manila via IIawaii and 

turned via Hawaii making 13 round voyages altogether The L

coln Oleveland Pierce Taft and Wilson at regular intervals dur

theyear departed 13 times from California for IIawaii en route fro

New York to Manila and returned viaHawaii

4 Schedules were issued and posted and standard fares establish

The combination ofthe Trans Pacific and the New York schedu

resulted in 26 regular fortnightly departures from California dur

1935 Italso resulted in 26 regular fortnightly arrivals from Haw

on the alternate weeks during 1935 Combined arrivals and dep

6 F M 
AMERICAN PRESIDENT LINES LTD HAWAII PASSENGER SERVICE 97

tures between California and Hawaii and return equalled 52 for all

seven vessels

5 The seven vessels in 1935 actually carried 1 297 passengers west

to flawaii and 1 555 passengers east to California or a total of 2 852

passengers out of a total of 38 581 passengers traveling between these

points by sea They carried 7 4 percent ofthe passengers in 1935 and

also carried 3 204 L Tof cargo

6 California IIawaii passengers were sold

space which waS avail

able but not sold to the Far East and to returning passengers APL

wasnot able to reconstructvoyage plans which would show the amount

of space unsold but available or held out to passengers between Cal

ifornia and Hawaii in 1935 i e its total capacity used and unused

for this service It was simply everything left over after Far East

passengers had been taken care of This space was sold and cargo

bookings were made by Matson under an agreement with APL s

predecessor but 4

PL s predecessor was directly responsible to pas

sengers andshippers in rendering service

7 In November 1938 the name of Dollar Steamship Lines Inc

Ltd waschanged to American PresidentLines Ltd

We have concluded from the foregoing thatAPL or a predecessor in

interest wasin bona fide operation as a common carrier by water in the

domestic and intercoastal trade in 1935 over the Foute for which the

present application is made

As a minimum APL has the right to make 13 departures or 26 round

trips between California and the Far East with stops at Hawaii with

the same two vessel capacity and 13 departures or 26 round trips from

New York for theFar East with stops at California Los Angeles San

Francisco and IIawaiiwith the same five vessel capacity The prob

lem is the translation of these departures and this capacity to 1960

conditions and the determination of how these departures and this

capacity may be expressed to describe the scope of APL s grand

father rights and accommodate changes in the traffic or changes in

vesselsize and design over the intervening25 years

Since 1935 APL or its predecessor in interest have maintained ap

proximately the same service except for the war time interruption

from 1941 through 1945 orother conditions overwhich it had no con

trol After the war it used different vessels to some extent and its

departures have diminished In 1958 12 departures were made

During this period of activity it carried a low of 1 342 passengers in

1947 which was 54 percent ofthe total passengers carried and a

high

of 3 574 passengers in 1950 which was6 7 percent of the total passen

ger carried It has carried as high as 15 6 percent of the passengers

carried in 1948 and a low of 17

percent in 1958 Its capacity likewise

6 F M B
98 FEDE RAL MARITIME BOARD

has varied particularly during the period after the war All ofth

activity over 25 years has presumably been consistent with its righ

under section 805 a During the period from 1935 through 1958 t

total number of passengers traveling this route by sea has increas

from 38 584 to 95 286 APL s share of these travelers dropped to 

percent in 1957 when it made 17 departures from California and 

from Hawaii with 3 vessels the Wilson Oleveland and Hoover A

plicant now seeks authority to carry more than 2 852 passengers a

3 204 L T of cargo a

year on no more than 35 round trip voyag

which differs from therequirements ofour report ofApril 28 1960

DISCUSSION

The principal argument ofAPL is that our earlier report denied 

the right under the proviso ofsection 805 a to grow with the trad

which has more than doubled We have held that under the prov

operators are entitled to substantial parity of operations duringt

base year 1935 2

APL seeks to equate substantial parity with grow

and a

right to maintain its same position in relation to the increas

volume of travel In the past however we have concluded that s

tion 805 a does not give such a

right ofgrowth but only protects 

1935 position 3In this view it may maintain substantially its 1

rights whatever they may be

Comparison is made between section 805 a ofthe Act and sect

206 a oftheMotorCarrier Act to fortify the growth argument T

two sections are not similar however The latter includes a provis

which was not included in the later enacted lerchant Marine A

1936 prohibiting the Interstate Commerce Commission from limiti

a carrier s right to add to his or its equipment and facilities 

the development of the business and the demands of the public 

quire Emphasis supplied Therefore the court decisions wh

deny a purpose in the Motor Carrier Act to freeze the service to 

exact status as the base year or to the precise pattern ofprior activit

are not applicable to section 805 of our Act Otherwise the expr

omission ofthequoted words from the later enactment would be me

ingless We cannot restore the meaning ofthe omitted words by 

decisions

The legislative history of section 805 a on the contrary shows t

the section s purpose was first to protect those operating exclusiv

in the coastwise or intercoastal service from subsidy aided comp

I Ameman President LiMS Ltd Subsidy Rotlte 17 4 F M B M A 488 502 19

8Id

6 F M
AMERICAN PRESIDENT LINES LTD HAWAII PASSENGER SERVICE 99

tion 6and second to allow those who receive operating differential

subsidy aid to continue the coastwise or intercoastal service they were

giving in 1935 6Expansion was authorized only if it was determined

pursuant to application therefor that the proposed service would not

result in unfair competition to the exclusively coastwise and inter

coastal operators but only under other parts of section 805 a An

application for section 805 a permission covering the service which

APL apparently contemplates at this time is notbefore us

Since there wa no new information developed at the hearing on the

petition for reconsideration relevant to grandfather rights there is

nothing that warrants our changing our position as to the measure of

grandfather rights set forth in our original report

Inview ofthe foregoing

Itis ordered That thepetition for reconsideration be and it is here

by denied

By the Board

Sgd JAMES L PIMPER

Secretary

See Hearings on S 3500 Senate Committee on Commerce 74th Cong 2d sess pp 87

89 and the testimony ot Mr J C Peacock Director Shipping Board Bureau

II Id p 77 See also Am Pres Lines Lta UnsubBidized Operation Route 17 a

F M B M A 457 1951

6 F M B

732 047 0 64 8
100 FEDERAL MARITL1E BOARD

AFPENDIX

Section 805 a

It shall be unlawful to award or pay any subsidy to any contractor u

authority of title VI of this Act or to charter any vessel to any person un

title VII of this Act if said contractor or charterer or any holding comp

subsidiary affiliate or associate of such contractor or charterer or any off

director agent or executive thereof directly or indirectly shall own ope

or charter any vessel or vessels engaged in the domestic intercoastal or coastw

service or own any pecuniary interest directly or indirectly in any perso

concern that owns charters or operates any vessel or vessels in the dome

intercoastal or coastwise service without the written permisSion of the C

mission Every person firm or corporation having any interest in such app

tion shall be permitted to intervene and the Commission shall give a hearin

the applicant and the intervenors The Commission shall not grant any s

application if the Commission finds it will result in unfair competition to 

person firm or cOrPOration operating exclusively inthe coastwise or intercoa

service or that it would be prejudicial to the objects and policy of this A

Provided That if such contractor or other person abovedescribed or a prede

sor in interest was in bona fide operation as a common carrier by water in 

domestic intercoastal or coastwise trade in 1935 over the route or routes o

the trade or trades forwhich application is made and has so operated since 

time or ifengaged infurnishing seasonal service only was in bona fide opera

in 1935 during the season ordinarily covered by its operation except in ei

event as to interruptions of service over which the applicant or its predece

in interest had no control the Commission shall grant such permission with

requiring further proof that public interest and convenience will be served 

such operation and without further proceedings as to the competition in s

route or trade

If such application be allowed it shall be unlawful for any of the pers

mentioned in this section to divert directly or indirectly any moneys prope

or other thing of value used in foreign trade operations for which a subsid

paid by the United States into any such coastwise or intercoastal operatio

and whosoever shall violate thisprovision shall be guilty of a misdemeanor

6 F M 
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No 8115

MOORE McCORMACK LINES INC ApPLICATION UNDER SECTION 805 a

Submitted August 3 1960 Decided AugU8t 3 1960

Moore McCormack Lines Inc granted written permission under section 805 a

of the Merchant Marine Act 1936 as amended for its vessel the SS

Mormacguide presently under time charter to States Marine Lines Inc

to engage in one voyage in the domestic coastwise and intercoastal trade

carrying general cargo from Hawaii and California ports to Gulf ports

comDlenCing at Hawaii on or about August 7 1960 since tipgof the

permission found 1 not to result in unfair competition to any person

firm or corporation operating exclusively in the coastwise or intercoastal

trade and 2 not to be prejudicial to the objects and policy of the Act

Ira L Ewers for applicant

John E Cograve as Public Counsel

REPORT OF THE DpurlY MARlTUIE ADMINISTRATOR

RY THE DEPUTY MARITIME ADMINISTRATOR

Moore McCormack Lines Inc filed an application for written per

mission under section 805 a of the Merchant Marine Act 1936 as

amended 46 DS C sec 1223 the Act for its vessel the SS M Of1TlA1C

guide presently under time charter to States Marine Lines Inc to

engage in one domestic coastwise and intercoastal voyage carrying

generalcargo from Hawaii and California ports to Gulf ports com

mencing at Hawai on or about August 7 1960 Notice of hearing

was published in the Federal Register of July 27 1960 25 F R

7110 No oneappeared in opposition to the application

States 1arine intended to use its own vessel the SS Lone StarState

for the voyage but the vessel is unavailable because of damage to a

hoiler In view of the amount of cargo available it is necessary to

101

M A
102 MARITIME ADMINISTRATION

have 03 type vessel but the only vessel of that type in posi

to satisfactorily perform the voyage is the Mormacguide

It is found that the granting of the requested permission will 

result in unfair competition to any person firm orcorporation ope

ing exclusively ih the coastwise or intercoastal trade or be prejudi

to the objects Hncl policy ofthe Act

This report shan serve as written permission for the voyage

6 M 
FEDERAL MARITIl1E BOARD

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Tashington D C on the 11th day of August AD 1960

No 890

UNAPPROVED SECTION 15 AGREEMENTS SPANISH PORTUGUESE TRADE

This matter has been presented on interlocutory appeal from a

ruling by the hearing examiner The situation as presented to us

is as follows

1 In his ruling of June 7 1960 the examiner denied respondents

appeal to the Board from his ruling of April 27 1960 granting a

motion by public counsel for discovery and production of documents

under Rule 17 k of the Board s Rules of Practice and Procedure

and denied respondents motions for a referral to the Board for de

termination of issues pursuant to Rule 10 m The examiner con

cluded that respondents had not shown any extraordinary circum

stances where prompt decision by the Board is necessary to prevent

unusual delay expense or detriment to the public interest as re

quired by Rule 10 m

2 R espondent Compagnie de N a vigation Fraissinet et Cyprien

Fabre thereafter filed a motion for hearing d determination by

the Board asking for a waiver under Rule 1 i of the requirements

of Rule 10 m which prohibit appeals from rulings of presiding

officers prior to or during the course of hearing except in unusual

circumstances Respondents Concordia Line American Export Lines

Inc and North Atlantic Spanish Conference filed similar motions

Respondent Naviera Aznar S A also moves for reconsideration of

the examiner s ruling

3 Petitioners pursuant to Rule 1 i

request waiver of the pro

hibition against interlocutory appeaIs in Rule 10 m on the ground

that such action is needed to prevent undue hardship in this par

ticular case They argue that undue hardship will occur because they

will be subjected to unusual delay and expense as the result a of

103

6 F lIR
104 FEDE RAL MARITIME BOARD

the need to preserve their rights by assuming a posture of defia

leaving it to the Board to justify the examiner s

ruling in an enfo

ment proceeding or by not cooperating in view of being wholly 

the dark about the violations with which they are charged b 

lack of know ledge as to the status of Public Counsel as eithe

representative of the Board or as a party to the proceeding c 

the absence of any ruling on the necessity for producing docume

of foreign nationals located in foreign countries and d of 

difficulties of obtaining unspecified documents covering a period 

10 years

DISCUSSION

In view of the importance of the questions raised by responde

and of the necessity for a prompt decision by the Board we 

waiving Rule 10 mpursuant to Rule 1 i in order to review 

examiner s rulings ofApril 27 1960 and June 7 1960 vVe sus

the examiner

Respondents principal contentions are

1 The ruling would endow the Board with power not gnln

by Congress ie empower the examiner as presiding officer to di

respondents as parties to produce and permit the inspection 

copying of documents in response to a motion by Public Counse

a

party showing good cause therefor under Rule 12 k suc

directive is not expressly authorized by the Shipping Act 1

which authorizes these proceedings and such Act only author

the issuance ofsubpenas by the Board itself under section 27

2 Rule 12 k requires that an examiner s directive must be 

response to a motion showing good cause therefor and good c

has not been shown in Public Counsels motion

3 The examiner failed to grant requests for further partiou

relative to the Board s order of investigation ie the required do

ments were not described more specifically and their relevence to 

issues were not shown

4 The examiner s

ruling compels the production of docum

located in foreign countries and owned by foreign corporations

Ve discuss these contentions on their merits in the order presen

above

Authorization Examiners directives for the production of do

ments pursuant to Rule 12 k are authorized by the Merchant Ma

Act 1936 even though the investigation is initiated pursuant to 

Shipping Act 1916 Section 204 a of the 1936 Act transfe

to the United States Maritime Commission all the functions pow

and duties vested in the former United States Shipping Board 

6 F M 
UNAPPROVED AGREEMENTS SPANISH PORTUGUESE TRADE 105

the Shipping Act 1916 and section 204 b authorized the

Maritime Commission to adopt all necessary rules and regulations

to carry out the powers duties and functions vested in it by this

Act which included powers under the 1916 Act Investigation

of violations is of course a major function power and duty of the

agency administering the 1916 Aot Thereafter section 104 of Re

organization Plan No 21 of 1950 64 Stat 1273 transferred to

the Federal Maritime Board established by section 101 thereof

the regulatory functions of the Maritime Commission under the

1916 Act and by section 105 the Board was given 5 So much

of the functions with respect to adopting rules and regulations

making reports and recommendations to Congress subpoenaing

witnesses administering oaths taking evidence and requiring the

production of books papers and documents under the provisions

of sections 204 208 and 214 of the Merchant Marine Act 1936 as

amended as relates to the functions of the Board rmder the

provisions of this reorganization Plan We are of the opinion

moreover that the power to direct the production of documents in

the manner prescribed by Rule 12 k is impliedly contained in the

1916 Act as a necessary adjunct to the power vested in the Board

by that Act to conduct administrative proceedings In this con

nection see section 22 of the 1916 Act authorizing the Board to in

vestigate any violation oftheAct s provisions

Rule 12 k was adopted under the Board s rule making power

as expressly vested in the 1936 Act and as impliedly vested in the

1916 Act Production and inspection of documents under Rule 12 k

is essential to the effectiveness ofthe present investigation

Good cause Our order of investigation set the subject of the

inquiry in the general terms of whether respondents in their opera

tions in the trade between the United States and Spain and or

Portugal since 1949 have entered into or carried out agreements in

violation of section 15 of the 1916 Act The order reflects that the

Board has reason to believe respondents may have violated section

15 The ground for the directive issued by the examiner is the

discovery production and inspection of documents necessary and

relevant to the preliminary stages of this inquiry and that was made

clear in the examiner s ruling ofApril 27 1960 directing respondents

under Rule 12 k to produce and permit inspection of the documents

specified in Public Counsel s motion Clearly these proceedings

satisyfy the requirements of good cause within the meaning of

Rule 12 k Moreover Public Counsel under the Board s rules

is expressly made a party acting in the public interest and is en

titled as such to invoke Rule12 k

6 F M B
106 FEDERAL MARITIME BOARD

Particularity The Board s order of investigation states the iss

and the examiner s April 27 ruling requires Public Counsel to m

available to respondents at least ten days in advance of the hea

an outline of the principal facts to be presented At the hea

respondents may make any appropriate motions necessary to a 

and fair hearing In its present stage this proceeding is me

investigatory Public Counsel is and properly so engaged in 

gathering of information preliminary to the presentation of evide

pointing to the question of whether there have been violations 

the 1916 Act At this preliminary stage neither the Board no

staff is obliged to draw an indictment It is enough that be

any affirmative proof ofalleged wrongdoing is presented respond

be given a fair and adequate notice of what violations they wi

charged with and an opportunity t

o defend against them T

is the procedure being followed in the instant case

Foreign docwments We have no doubt as to our power to req

the production of relevant documents physically located outside 

United States The 1916 Act imposes on us the responsibility 

regulating common carriers by water operating in the foreign c

merce of the United States regardless of the nationaJity of 

carriers Certain agreements and practices are proscribed by 

Act whether accomplished in the United States or abroad 

viously the Board could not discharge its

responsibility and the 

Act itself would be largely ineffectual if the Boa rd s authority 

tended only to the proouotion of documents found within the Un

States It appears unnecessa ry however to elaborate on the p

at this juncture ofthe present proceeding In their reply to resp

ents motions Public Counsel state that they do not press at 

time for the production of documents not currently located w

the United States consequently in the final analysis such docum

may not prove to be essential in this case

In view ofthe foregoing

It is ordered That the above mentioned petltlOns and mot

insofar as they seek a Vaiver of Rule 10 m pursuant to Rule 

be and they are hereby granted and

Itis further ordered That said petitions a nel motions in all o

respects be and they are hereby denied

By the Board

Sgd JAMES L PIMPER

Secreta

6 F M 
FEDERAL MARITIME BOARD

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 18th day of August AD 1960

No 884

UNAPPROVED SECTION 15AGREEMENTS JAPAN KoREA OKINAWA TRADE

This matter has been presented on interlocutory appeal from a

ruling by the presiding examiner The situation as presented to us

is as follows

1 In his ruling of June 22 1960 the examiner denied respondents

appeal to the Board from his ruling of March 21 1960 granting a

motion by Public Counsel for discovery and production of documents

under Rule 12 k of the Board s Rules of Practice and Procedure

and denied respondents motions for a referral to the Board for

determination of issl les pursuant to Rule 10 m The examiner

concluded that respondents had not shown any extraordinary cir

cumstances where prompt decision by the Board is necessary to prevent

unusual delay expense or detriment to the public interest as required

by Rule 10 m

2 Hespondents Barber vVilhelmsen LineJointService and Maersk

Line thereafter filed motions for hearing and determination by the

Board asking that the Board direct the examiner to refer to it for

review his ruling of June 22 1960 together with his prior ruling

referred to therein and all motions replies and memoranda of the

parties related to either of the rulings hear oral argument and make

and enter an order reversing the examiner s

rulings and denying

Public Counsels motion for discovery and production of documents

Respondent United States Lines made no request for reconsideration

or in the alternative referenceto the Board

3 Petitioners request action in view of the general importance of

the questions presented and the serious constitutional and statutory

issues involved in their solution They also argue that they will be

subjected to unusual delay and expense as the result 1 of the need

6 F M B 107
108 FEDERAL MARITIME BOARD

to preserve their rights by assuming a posture of defiance lea

it to the Board to justify the examiner s

ruling in an enforce

proceeding orby not cooperating in view ofbeing wholly in the 

about the violations with which they are charged 2 of the ab

of any ruling on the necessity for producing documents of fo

nationals located in foreign countries and 3 of the difficultie

obtaining unspecified documents coveting a period of several y

DISCUSSION

Inasmuch as the basic questions involved in this proceeding an

legal contentions of respondents and of Public Counsel are sub

tially thesame as those disposed ofby us in Unapproved A gree l1U3nts

Spanish Portuguese Trade 6 F MB 103 1960 and for the rea

set forth therein we sustain the ruling ofthe presiding examiner

Inview oftheforegoing

Itis ordered That the above mentioned petitions and motion

and they arehereby denied

By theBoard

Sgd JAMES L PIMPER

Secreta

6 F M 
FEDERAL MARITIME BOARD

No S 73 SUB No 1

WATERMAN STEAMSHIP CORPORATION ApPLICATION UNDER

SECTION 805 a

SUbmitted August S 1960 Deoiited August 19 1960

Waterman Steamship Corporation granted written permission under Section

805 a of the Act to engage in domestic coastwise service between United

States Pacific Coast ports and ports in Puerto Rico and for continuation

of the pecuniary interest of McLean Industries Inc and the officers and

directors of McLean Industries Inc and Waterman in Waterman Steam

ship Corporation and for continuation of the agency arrangements be

tween Waterman and its subsidiaries Waterman Corporation of California

and Waterman Steamship Corporation of Puerto Rico in connection with

such service will not result in unfair competition to any person firm or

corporation operating exclusively in the domestic intercoastal or coastwise

service nor be prejudicial to the objects and policy of the Act

Sterling F Stoude lllmire Jr for applicant Waterman Steamship

Corporation

George BU7lIn and William D Rogers for intervener the Common

wealth of Puerto Rico in support of the application

John E Oograve and EdwardAptaker as Public Counsel

INITIAL DECISION OF EDWARD C JOHNSON EXAMINER

INTRODUCTION

In an application dated May 16 1960 and served on May 26 1960

Waterman Steamship Corporation Waterman an applicant for

operating differential subsidy under the provisions of the Merchant

Marine Act 1936 as amended applied for written permission under

Section 805 a of the Act 1to continue after it is subsidized to

In the absence of exceptions thereto by the parties and upon notice by the Board

the initial decision of the examiner became the decision of the Board on the date shown

section 8 a of tbe Administrative Procedure Act and Rules 13 d and 13 b of the

Board s Rules of Practice and Procedure

1

Section 805 a i9 set forth in Appendix A attached hereto

6 F M B 109
110 FEDERAL MARrrIME BOARD

operate a domestic coastwise service between United States P

Coast ports and ports in Puerto Rico Request is also made 

permission for McLean Industries Inc Applicant s parent an

the officers and direotors of Applicant and ll1cLean Industries 

to continue to own a pecuniary interest directly or indirect

Applicant and for approval of the continuation by Applicant o

agency arrangements with its subsidiaries vVaterman Corporatio

California and Waterman Steamship Corporation of Puerto 

performed in connection with such service The application was

noticed in the Federal Register on May 28 1960 A hearing 

held in Washington D C on r une 15 1960 No parties interv

in opposition to the granting of the requested permissions As a

indicated the Commonwealth of Puerto Rico appea red in suppo

the application Public Counsel has expressed no differences 

the proposed findings and conclusions submitted by Applieant w

in general and subject to certain modifications hereinafter noted 

incorporated herein

FINDINGS OF FACT

The testimony and evidence in this case shows the following

1 vVaterman a wholly owned subsidiary of ll1eLean Indus

Inc commenced a Pacific Coast Puerto Rican service in 1949 

either it or its affiliate Sea Land Service Inc formerly know

Pan Atlantic Steamship Corporation has operated continuous

that trade since then No claim of grandfather rights is invo

2 Waterman operated this service until recently in conne

with its vessels returning from the Far East operated in the G

Far East trade Recently the service has been provided by o

vessels confined exclusively to the service between United S

Pacific Coast ports and Puerto Rico Service has been provide

proximately on a monthly basis and is expected to continue sub

tially on that basis for the immediate future

3 Waterman at present is the only common carrier prov

a

regular berth service from Northwest Pacific Coast ports and 

Los Angeles to Puerto Rieo In addition it serves San Francisco 

Stockton California

4 Isbrandtsen Company Inc provides a service from the 

Francisco Bay Area only including Stockton to Puerto Rico w

service is performed in connection with its vessels operated 

Eastbound Round the World service

5 Isbrandtsen also has pending an application for subsidy o

Eastbound Round the World service and the Board has appro

6 F M 
WATERMAN S S CORP SEC 805 a APPLICATION 111

under Section 805 a of the Act continuation of the Pacific Coast

Puerto Rican leg of that service after Isbrandtsen becomes subsidized

6 Pope Talbot Inc operates a common carrier service from

Puerto Rico to United States Pacific Coast ports in connection with

its intercoastal service but has not operated for some time from the

Pacific Coast to Puerto Rico

7 Waterman observes the same rates as Isbrandtsen and Pope

Talbot

8 Neither of the above mentioned lines oppose the application

and in fact no opposition to the application was registered by any

person firm or corporation The Commonwealth of Puerto Rico

intervened in support of the application

9 A large movement of general cargo consisting of rice beans

canned goods and numerous other general commodities moves from

the Pacific Coast to Puerto Rieo and in a much smaJler volume lim

ited general commodities move from Puerto Rico to the Pacifie Coast

During the period 1955 1959 vVaterman and or its affiliate Sea

Land Service Inc handled 431 495 tons of cargo in this trade n

verag

ing approximately 86 000 tons of cargo a

year For the years 1955

1958 a total of 736 961 tons of cargo moved from the Pacific Coast

to Puerto Rico averaging approximately 185 000 tons per year

Vaterman s participation in the total movement approximately

86 000 tons per year has been substantial

10 Without the service of Vaterman there vould be no water

common carrier service available from the lTnited States Pacific Coast

to Puerto Rico other than Isbrandtsen s service from the San Fran

isco Bay Area A large number of shippers on the Pacific Coast

itre dependent on the service of Vaterman to meet their shipping

needs to Puerto Rico

11 Waterman Corporation of California a wholly owned subsidi

itry of Vaterman acts as agent on the Pacific Coast for vVaterman

performing solicitation service husbanding of vessels and related

ervices An agency eommission of 5 revenue which is standard

tnd customary in the industry is paid by Vatcrman for these services

12 Waterman Steamship Corporation ofPuerto Rico also a wholly

wned subsidiary of Vaterma n

performs similar agency services for

Waterman in connection with this service in Puerto Rico receiving

he same agency fee It also furnishes terminal facilities and steve

ioring services to vessels operated by vVaterman in this trade

13 Waterman is a wholly owned subsidiary of licLean Industries

nc and the officers and directors of both are interlocking to a cer

6 F MB
112 FEDERAL MARITIME BOARD

tain extent and hence Applicant sparent and the officers a

tors of both Applicant and its parent have a direct or 

pecuniary interest in Applicant request for permission to 

which has been made

14 No exclusive domestic coastwise operator operates f

Pacific Coast to Puerto Rico and no record objection has be

by any person firm or corporation to the application

15 Maritime shipping services are vitally important to 

than 2 million people of the Commonwealth of Puerto R

supporting this application the Commonwealth shows th

half of what it produces and over half of what it consumes 

ported by water Ocean shipping services are the life line o

Rico in the furnishing of foodstuffs and other commodities 

to the everyday life of its people on an island approxima

miles long and 35 miles wide and located more than a 

miles from the nearest port in the United States and much 

away from the important United States Pacific Coast po

which it gets essential food stuffs and raw materials Th

uation of ocean shipping services likewise has a vital be

its own public programs and policies and its recent 20 

Port Development Construction Program has taken on re

ing in relation to gearing its limited pier facilities in S

and elsewhere to increased cargo movements by water T

new Island industries are by necessity oriented toward oce

ping and since Puerto Rico s present industrial developm

gram cannot depend solely on local resources or markets 

lacks major raw materials it then becomes primarily depend

shipping from all geographic areas to develop the econom

of the Island

CONCLUSION

On this record it is found that the granting of the reque

mission under Section 805 a of the Merchant Marine Act 

amended for Applicant Waterman Steamship Corpor

engage in domestic coastwise service between United State

Coast ports and ports in Puerto Rico and for continuatio

pecuniary interest of McLean Industries Inc and the off

directors of McLean Industries Inc and Waterman in W

Steamship Corporation and for continuation of the agency 

ments between Waterman and its subsidiaries Waterman 

ration of California and Waterman Steamship Corpo

Puerto Rico in connection with such service will not result 

competition to any person firm or corporation operating ex
WATERMAN S S CORP SEC 805 a APPLICATION 113

in the domestic intercoastal or coastwise service nor be prejudicial

to the objects orpolicy oftheAct

This report shall serve as such written permission for the fore

going services interests and arrangements requested by Applicant

in the absence of any exceptions thereto or review thereof by the

Board

6 F M B
114 

APPENDIX A

Section 805 a

It shall be unlawful to award or pay any subsidy to any co

authority of title VI of this Act or to charter any vessel to any 

title VII of this Act if said contractor or charterer or any ho

subsidiary affiliate or associate of such contractor or charterer 

director agent or executive thereof directly or indirectly shal

or charter any vessel or vessels engaged in the domestic interco

wise service or own any pecuniary interest directly or indirectly 

or concern that owns charters or operates any vessel or vessels 

intercoastal or coastwise service without the written permissio

mission Every person firm or corporation having any intere

plication shall be permitted to intervene and the Commission 

hearing to the applicant and the intervenors The Commis

grant any such application if the Commission finds it will re

competition to any person firm or corporation operating exc

coastwise or iutercoastal service or that it would be prejudicial 

and policy of this Act Provided that if such contractor o

above described or a predecessor in interest was in bona fide 

a common carrier by water in the domestic intercoastal or c

in 1935 over the route or routes or in the trade or trades for wh

is made and has so operated since that time or if engaged 

seasonal service only was in bonafide operation in 1935 dur

ordinarily covered by its operation except in either event as to 

of service over which the applicant or its predecessor in interest 

the Commission shall grant such permission without requiring fur

public interest and convenience will be served by such operatio

further proceedings as to the competition in such route or trade

If such application be allowed it shall be unlawful for any 

mentioned in this section to divert directly or indirectly any mo

or other thing of value used iu foreigntrade operations for w

is paid by the United States into any such coastwise or intercoas

and whosoever shall violate this provision shall be guilty of a m
FEDERAL MARITIME BOARD

No 8 73

WA TERl fAN 8TEAllSHIP CORPORATION AprLICATION UNDER SECTION

805 a

Submittea April 13 1960 Decided September 12 1960

1 Waterman Steamship Corporation as predecessor in interest of its sub

sidiary Waterman Steamship Corporation Puerto Rico has grandfather

rights under section 805 a of the lIerchan t Marine Act 1936 the Act

to the extent of 26 sailillgs annually between New Orleans La and Mobile

Ala and ports in Puerto Rico

2 Grant of permission to Waterman Steamship Corporation to continue service

by its subsidiary Waterman Steamship Corporation Puerto Rico between

Gulf of Mexico ports east of and including New Orleans and Puerto

Rico would not result in any competition with an exclusively domestic

operation nor be prejudicial to the objects and policy of the Act

3 Grant of permisSion to Vaterman Steamship Corporation to continue service

by its affiliate Pan Atlantic Steamship Corporation Sea Land Service

Inc between Atlantic ports and ports in Puerto Rico would not result

in unfair competition to any person firm or corporation operating exclu

sively in the intercoastal service and would not be prejudicial to the

objects and policies of the Act

4 Vaterman Ste tll1ship Corporation s affiliate Pan Atlantic Steamship Corpo

ration Sea Land Service Inc has grandfather rights under section

805 a of the Act in service from New York N Y to New Orleans to the

extent of 53 voyages using notmore than 4 vessels but does not have any

such rights in service from New Orleans to New York

5 Permission to Vaterman Steamship Corporation to provide trailership serv

ice by its affiliate Pan Atlantic Steamship Corporation Sea Land Service

Inc from New Orleans to New York denied because it would result in

unfair competition to an exclusively coastwise service and be prejudicial

to the objects and policy of the Act

6 Grant of permisSion to Waterman Steamship Corporation to provide two

vessel weekly trailership service between Port Newark N J and Houston

lexas would not result in unfair competition to any person firm or

corporation operating exclusively in the coastwise service nor be prejudi

cial to the objects and policy of the Act

115

6 F l1B

732 047 0 64 9
116 FEDERAL MARITIME BOARD

7 Permission granted to Waterman Steamship Corporation to charter 

ClOtirborne and the Monarch of the Seas to Waterman Steamship Cor

ration Puerto Rico for operation between Gulf of Mexico ports and Pue

Rico

8 Permission granted to V terman Steamship Corporation to charter or s

charter the Bienville Raphael Semmes Fairland Azalea Oity and Gatew

City to Pan Atlantic Steamship Corporation Sea Land Service Inc 

operation between ports on the Atlantic and Gulf coasts and in t

AtlanticlPuerto Rico trade

9 Permission granted to Waterman Steamship Corporation to act as gene

agent for Waterman Steamship Corporation Puerto Rico in the Uni

States

10 Petition of Erie and St Lawrence Corporation and Containerships Inc 

intervene and to reopen proceeding denied

Sterling F Stoudenmire Jr Donald MacLeay llarold E Mesiro

and Warren Price Jr for Vaterman Steamship Corporation a

Pan Atlantic Steamship Corporation

William D Rogers and Eduardo Garcia for The Commonwea

of Puerto Rico S S Eisen for Seatrain Lines Inc Mark P ScMe

and John O Wren for Bull Insular Line Inc and Alcoa Steamsh

Company Inc Odell Kominers and J Alton Boyer for Luckenba

Steamship Company Inc M Ja1JMS SJ itze1 Irvilng FUegle1 a

O B Oline for TMT Trailer Ferry Inc Oarl Ilelmetag J1 R 

Trigg and lV Q Keenan for the Pennsylv 1nia Railroad Compa

and The New York New Haven Hartford Railroad Compan

Arthur L lVinn Jr Frances A l1lulheln Samuel II Aloerma

J Stanley Payne and Walter J Alyslcowski for Port of New Yo

Authority David E lVells for Atlantic Coast Line Railroad Co

pany Richard fl AI Swann for City of Miami Florida F O Ililly

for Jacksonville Area Chamber of Commerce and tTacksonvi

Traffic Bureau Inc and O B Perry for IIulris County Houst

Shi pChannel Navigation District in terveners

Edward Schmeltzer Ed1lJard Apta1ce1 and Robe1tE Alitchell 

Public Counsel

REPORT OF n m BOAlW

THOS E STAKEl I Jr Vice Ohai1 man SIGFRID B UN NDER

1ember

By THE BOARD

Vaterman Steamship Corporation Vaterman or npplicant fil

on Janua ry 30 1957 an a pplication for operating differential su

sidy covering various services 1 On April 2 1957 a

pplicant fil

1 See 5 F M B 771 for a full discusfion of Waterman s ubiid v application and 

Board S

findings thereon In rcl ltion to section 605 c of the l lerchan t

lal ine Act 19

6 F M B
WATERMAN S S CORP SEC 805 a APPLICATION 117

an application for permissian under section 805 a

2

af the ierchant

Marine Act 1936 as amended the Act far its affiliates and officers

to continue the fallowing domestic coastwise services charters and

relationships

1 Vatelman Steamship Corporation of Puerto Rico Taterman

P R applicant s wholly awned subsidiary to operate unsubsidized

vessels between Gulf ports east ofand including New Orleans Louisi

ana and portsin Puerto Rico

2 Pall Atlantic Steamship Corparatian Pan Atlantic its affili

ated company to Qperate unsubsidized vessels between Atlantic ports

andports in Puerto Rico 3

3 Pan Atlantic to aperate unsubsidized vessels between Atlantic

ports between Gulf ports and between Atlantic and Gulf ports

4 Vaterman to continue to charter the OlairbO ne and the Mon

arch of the Seas to Taterman P R for aperation in the Gulf Puerto

Rica trade

5 Vaterman to continue to charter the Bienvtlle Ra7 hael Semmes

Fairland Azalea Oity and Gateway Oity to Pan Atlantic for opera

tiQn in the trade between PQrts on the Atlantic and Gulf coasts and

in the Atlantic Puerto Rico trade

6 The cQntinuatian of an agency agreement between WatJwan

and Vaterman P R and of the pecuniary interest of the former in

the latter

The fallowing parties intervened Bull Insular Line Inc Bull

AlcQa Stemllship Company Inc Alcoa Seatrain Lines Inc Sea

train and T iT Trailer Ferry Inc TMT The CommQnwealth

Qf Puerto Rico the Pennsylvania RailrQad Co The New York

New Haven Hartford Railroad Company and various cities and

Qthers as their interestsmight appear

Hearings were held befQre an examiner who in a recommended

decisian concluded in part as fallows

Waterman P R and its predecessor in interest found to have been continuously

engaged in the U S Gulf Puerto Rico service since 1928 and the continuation

of this servioe to the extent set forth in the finddngs and conclusions herein

found not to result in unfair competition to any person firm or corporation

operating exclusively in the domestic coastwise or intercoastal service and

not to be prejudicial to the objects and policy of the Merchant Marine Act

1936 as amended Written permiSSion under Section 805 a for the con

tinuation of this service and to continue certain charter and agency agree

ments between Waterman and Vaterman P R in the event a subsidy contract

is awarded should be granted Grandfatherrights prevail

I See appendiX

3

Pan Atlantic nnd Wnterman are owned by McLean Industries Inc Pan Atlantic

effective April 1 1960 changed Its name to Sea Land Service Inc

6 F M B
118 FEDERAL MARITIME BOARD

ApplicatiQn Qf Waterman Steamship CorpQratiQn fQr permissiQn 

Section 805 a of the Merchant Marine Act 1936 as amended to CQ

to Qperate its New YQrk PuertQ Rico trailership service Qf Pan Atlan

the event it is subsidized and to cQntinue certain financial arrangemen

tween and amQng McLean Waterman Pan Atlantic CQastal Beauregar

Sea Land shQuld be granted since it is found nQt to result in unfair co

tiQn to any persQn firm 01 cQrporation operating exclusively in the coa

0 1interCQastal service AlcQa Steamship CQ Inc nQt prejudicial to the Q

and PQlicy af theAct NO grandfather rights asserted

Granting written permission under Section 805 a O f the Act to 

man Steamship CQrpQratiO n to continue its JacksOnville Puerta Rica s

and its JacksQnville New YQrk service Qf P tn Atlantic in the event su

is awarded is necessary in arder to pravide adequate service in the trad

the award af such permissiQn wauld neither result in unfair campetiti

any exclusively dQmestic service Tl 1T Trailer l erry Inc as to the Ja

ville Puerta Rica service na exclusively coastwise service exists be

Jacksanville and New York nQr be prejudicial to the Qbjects and PQ

the Act NO element Qf grandfather rights invalved

Granting written permissiO l1 under SectiQn 805 a af the Act to Wat

SteamShip CQrparation to cQntinue to Qperate its New York New O

Sauthbaund service af Pan Atlantic in the event it is subsidized is m

by grandfather rights NarthbOund service valuntarily abandQned 19

1958 hence nO grandfather rights NarthbQund leg adequately served b

train an exclusively dQmestic caastwise aperatar and fQund entitled t

tectian against unfair competition

SectiQn 805 a pennissiQn cavering weekly service to Miami Tampa 

Jacksanville by Pan Atlantic vessels serving the New Yark New Orleans 

faund nat to result in unfair campetitiQn to any exclusively caastwise Qp

since there are nQne and wauld nat be prejudicial to the abjects and 

af theAct and shauld be awarded

Granting written permissiQn under SectiQn 805 a af the Act to Vat

Steamship CarpQration to cantinue to Qperate its New Yark HQustan s

O f Pan Atlantic in the event it is subsidized wauld nat result in any 

campetitiQn to an exclusively domestic service Seatrain nar wauld 

prejudicial to the abjects and PQlicy af the Act The trade is notnow adeq

served and the requested permissiQn shQuld be granted NO grand

rights abtain as to Applicant

Exceptions to the recomnlended decision and replies thereto 

filed and oral argument vas heard Exceptions and prop

findings not discussed in this report nor reflected in our fin

have been considered and found not justified by the facts or n

lated to material issues in thisproceeding

VateIman s related companies operate the following dom

serVICes

1 111 aterman PR Weekly two vessel break bulk servic

tween Mobile Alabama and New Orleans on the Gulf and San 

Ponce and Mayaguez in Puerto Rico

6 F 
WATERMAN S S CORP SEC 805 a APPLICATION 119

2 Pan Atlantic a Two vessel weekly trailership service from

Port Newark Ne v Jersey to San Juan Ponce and Mayaguez to

Jacksonville Florida for discharge and loading of Puerto Rico

cargo and loading ofPort Ne vark cargo to Port Newark

b Two vessel weekly trailership service from Port Newark to

Miami Florida to New Orleans to Tampa Florida to Port Newark

c Two vessel weekly trailership service between Port Newark

and IIouston Texas

Under section 805 a of the Act permission shall be granted to

continue the foregoing operations if it is shown that applicant haS

grandfather rights if no grandfather rights exist permission

shall not be granted if it is found that it will result in unfair compe

tition to any person firm or corporation operating exclusively in the

coastwise service or be prejudicial to the objects and policy of the

Act

I GULF PUERTO RICO SERVICE

A G Jandfatl er riqhts

Waterman commenced its common carrier operation between Gulf

of Mexico ports and ports in Puerto Rico in 1928 and has operated

that service continuously except during the period of Vorld Val II

when the vessels were requisitioned and other short periods due to

labor disturbances or other interruptions beyond its control until

the operation was transferred to Vaterman of Puerto Rico a wholly

owned subsidiary On February 25 1958 vVaterman conveyed all

right title and interest in its Gulf Puerto Rico service to Tater

man P R which has continued to provide weekly service between

Ney Orlealls fobile and PuertoRico 4

Applicant claims grandfather rights for vVaterman P R s two

vessel weekly service between Gulf ports east of and including New

Orleans and Puerto Rico In 1935 the base year for establishing

grandfather rights 1Vaterman operated a

fortnightly service pro

viding 26 sailings between New Orleans fobile Tampa and Puerto

Rico Between 1936 and the end of 1957 except during 1T orld Tar

II the Gulf Puerto Rico service provided between 45 and 56 annual

sailings with calls at New Orleans and Mobile

The examiner concluded that the Gulf Puerto Rico service was

covered by grandfather rights to the extent of at least 26 annual

voyages between New Orleans fobile and Puerto Rico further that

4

Waterman the former operator of the service 18 the predecessor in interest of

Waterman P R the present operator within the meaning of the grandfather rights

provisIon American President Lines Ltd Substidy Route 17 4 F M B M A 488

501 footnote 21 1954

6 F M B
120 FEDERAL MARITIME BOARD

annual sailings in excess of 26 and calls at Gulf ports other 

New Orleans and Mobile were not covered by grandfather 

because they are not in substantial parity with the service o

during the base year 1935 Applicant excepts to these conclu

contending thatits purchase or New York and Puerto Rico Steam

Company s N Y P R Gulf Puerto Rican seryice by an a

ment dated September 1 1939 yests it with grandfather right

the difference between the 26 sailings made by aterman in 

and the present weekly service or Vaterman P R for whic

tion 805 a

permissionis sought

N Y P R made approximately 46 sailings from the G

Puerto Rico in 1935 but it cannot yalidly be claimed that vVate

or iTaterman P R is the successor in interest to that service i

man purchased from N Y P R only the good will in the la

Gulf Puerto Rico service for a ten year period Prior to the a

ment Waterman and N Y P R each operated weekly se

from the Gulf to Puerto Rico Thereafter N Y P R with

rrom the trade and vVaterman continued to operate a weekly se

No ships were transrerred under the agreement vVaterman 

operated the ships formerly used by N Y P R and Water

so called acquisition of N Y P R did not result in any inc

oyer i

T

aterman s leyel of operations during 1939 This const

an abandonment or the seryice of N Y P R and does not sup

claim to grandfather rights

Bull and Alcoa except to the examiner s finding that 26 a

Gulf Puerto Rico yoyages of vVaterman P R aTe coyered by g

rather rights They contend that 26 sailings of the C 2 yessel

rently serving the trade are not in substantial parity with t

sailings or the Laker type vessels operated in 1935 pointing ou

the deadweight bale cubic has increased and that reefer servic

been added We disagree In considering the extent of g

father rights under section 805 a 1 substantial parity must 

between proposed and past operations and 2 the grandfa

clause cannot be so strictly construed as to permit absolutely no 

bility in equipment American President Lines Ltd supra W

Bull and Alcoa contend there is no evidence of an inward sery

1935 there is testimony unchallenged and unrefuted that such a 

ice existed

We find that vVaterman has grandfather rights in its Gulf P

Rico seryice to the extent of26 sailings annually between New Or

Mobile and Puerto Rico Permission maybe granted for th

ditional 26 yoyages only if it is found that it will not result in u

6 F 
WATERMAN S S CORP SEC 805 a APPLICATION 121

competition to an exclusively coastwise service or be prejudicial to the

objects and policy oftheAct

B Exclusively domestic operators

Alcoa and Bull oppose award of section 805 a permission with

respeci to vVaterman P R s Gulf Puerto Rico servicee on the

grounds that the examiner erroneously found that neither of them

would continue in this servicee in the future the services of both were

begun because of a decline in other srvices and their services must be

determined as of the date of applicant s

request or before rather than

on services initiated after this proceeding began Ve conclude that

neither Alcoa nor Bull had any exclusively domestic service in this

trade until after the application was filed hence no question ofunfair

competition is present

Alcoa began a Gulf Puerto Rico service onFebruary 26 1951 with

vessels which served in the outbound direction only until March 1958

and called at foreign ports on praCtically every voyage to pick up in

bound bauxite Since April 1958 some 12 months after Waterman

filed its application Alcoa has provided common carrier service in

both directions between Puerto Rico and the Gulf and except for one

voyage

5

has not called at foreign ports Bull instituted a Gulf

Puerto Rico service on February 11 1959 some three months after

the start of the hearing on Vaterman s application Based on the

sailings made during the few weeks of its existence it appears that the

service operates between New Orleans 1obile and Puerto Rico

vVe agree vith the examiner that neither Bull norAlcoa qualifies as

an exclusively domestic operatorin the Gulf Puerto Rico service with

in the meaning of section 805 a

Bull did not provide any service in this trade until February 1959

some two years after Vaterman filed its application Alcoa has pro

vided service outbound and inbound since April 1959 only over a

year

subsequent to the filing of the application for section 805 a permis

sion The chief reliance in proving an exchrsively domestic status

must be placed on sailings antecedent to the date of application for

section 805 a permission otherwise an intervener could enter the

service purely for the purpose of affecting determinations under that

section Indeed Bull and Alcoa seem to contend that the exclusively

domestic test under section 805 a may be entirely prospective Voy

ages prior to the filing of an application must be considered as the

basis for determination of exclusively domestic status otherwise an

intervener could gain such status merely by announcing that in the

6The Alcoa Roamer called at Trinidad June 21 1958 on a return voyage from Puerto

Rico to Mobile

6 F M B
122 FEDERAL MARITIME BOARD

future he would confine his operations to domestic ports thus 

senting a new service by a subsidized operator oreliminating a 

existing service by a new subsidy applicant without assuring 

service in thetrade to theshipping public

We agree with the examiner that even if Bull and Alcoa qua

as exclusively domestic operators in their Gulf Puerto Rico se

the fundamentally entitled doctrine was not applicable A

said in T J McOarthy Steamship Oo Sec 805 a Applicat

F MB 666 671 1959

The fundamentally entitled doctrine has been employed a to den

mission to a subsidized operator to inaugurate a new domestic ser vice 

established domestic operators entitled to protection have the need fo

capacity t9 carry cargoes which the applicant would attract Am Pres 

Ltd Unsubsidized Operation Route 1 American President Lines 

1tbsidy Route 1 and Pacific Far East Line Ino Sec 805 a Ca

Hawaii supra and b to deny permission to a subsidy applicant t

tinue domestic services as part of subsidized offshore services using sub

vessels where such domestic services have been ser ved by domestic operato

need the cargo and have the ability to carry it Isb1 andtsen Co Inc S

E B R01tnd the World supra We will not extend the fundamentally e

doctrine to deny the continuation of an exclusively domestic service by 

sidy applicant where as here the applicant has a long and continued asso

withthe protected trade and where he proposes to operate such service se

from his subsidized service Ifwe did such an operator could not part

in the development of our merchant marine by inaugurating a separa

distinct subsidized service without suffering the penalty of being ousted 

his unconnected traditional domestic service

O Preju4ice to the objects andpolicy ofthe Act

Bull and Alcoa contend that the examiner erred in finding th

award of permission for T aterman P R to continue to opera

present Gulf Puerto Rico service would not be prej udicial t

objects and policy of the Act Their contention is without 

The refusal of such permission would only result in the substi

of Bull and Alcoa in the trade for an operator of long standing 

ice which on this record has proven eificient and satisfacto

shippers The continuation ofsuch service could not in our op

be said to be prejudicial to the objects and policy of the Act 

the contrary to deny such permission to applicant might w

prejudicial to the objects and policy of the Act by deprivin

domestic water borne commerce between the Gulf and Puerto 

of an operator which has provided shippers with efficient s

aver a longperiod of years

tVe find that the grant of permissian to applicant to contin

Gulf Puerto Rica service wauld not result in unfair competit

6 F 
WATERMAN S S CORP SEC 805 a APPLICATION 123

any exclusively domestic operation nor be prejudicial to the objects

and policy ofthe Act

II NORTH ATLANTIC PUERTO RICO SERVICE

A Grandfather rights

Pan Atlantic provides a service between the Atlantic coast and

Puerto Rico with two trailerships the Fairland and the Azalea City

serving the ports of New York and Jacksonville This service was

inaugurated in October 1957 as a weekly break bulk service In

February 1958 Vaterma n P R took over the service when it sailed

the first trailership

to Puerto Rico Vaterman does not claim

grandfather rights in this service

B Excl usively coa8t vi8e operations

The examiner fOllnd that Bull was not an exclusive domestic

operator in the North Atlantic Puerto Rico trade but that Alcoa

is such an operator Ve agree Ve have already passed on this

issue as respects Bull s service and nothing in this record warrants

a change in our decision on this point in Isbrandtsen 00 InC Sub

sidy E B Rmmd the lVorld 5 F M B 448 and 5 F MB 483 1958

Alcoa operates a weekly service from North Atlantic ports to

Puerto Rico and since 1956 the vessels in this service have sailed

foreign on only one occasion A single foreign call as long ago as

1956 does not deprive this service of its exclusive coastwise status

Vhile Alcoa frequently called at Puerto Rico with vessels in its

North Atlantic Venezuelan service these calls do not deprive the

separate North Atlantic Puerto Rico service of its exclusively

domestic service Pacific Fal East Line Inc Sec 805 a Galls

at Hawaii 5 F NrB 1A 287 292 297 1957

O Unfair competition

In yiew of Alcoa s status as an exclusively domestic operator we

must determine whether the grant of the permission requested by

applicant would result in unfair competition to it

The examiner found that the grant would not result in unfair

competition that there was excess over all capacity of break bulk

vessels in the trade but that there was no such excess capacity among

container carrying vessels in the New York Puerto Rico trade and

that the container service provided by applicant was preferred by

shippers and was needed in Puerto Rico Accordingly the situa

tion we have as respects competition is to determine the extent to

which a new technique of transportation competes unfairly ith

a different existing technique Tonnage and vessel capacity on a

6 F M B
124 FEDERAL MARITIME BOARD

route are not the only factors in determining whether more cap

creates unfair competition Ve must also compare the types of 

ice When containership capacities are compared we find wi

applicant stonnage that there is a shortage to meet the deman

shippers and for the needs of interested areas The compe

offered a container vessel service which the evidence shows is n

is not unfair to an existing break bulk service This is the 

even though the latter service has excess capacity and may 

from the effects ofthe new competition The suffering is not a s

of unfairness Applicant proposes to meet the need and the ex

carriers do not Over two years ago applicant put its first traile

into operation and since July 30 1958 has operated the service 

weekly basis with vessels which wereconverted at considerable exp

Containership operation is ofparticular benefit in the Puerto 

trade In addition to its greater efficiency and lower cost it req

less terminal space and the evidence shows that there is an 

shortage of termina lfacilities in Puerto Rico The PortAuthor

the Commonwealth of Puerto Rico bases its portredevelopment 

on a projection that at least 40 to 45 percent of the cargoes m

in and out of Puerto Rico will move in containers when suff

containers are available Containers do not need shed space 

that is required is a yard which can be made more readily 

cheaply available Additionally container ship operation re

damage and pilferage vVhile Bull and Alcoa supply some conta

without the capacity provided by applicant there would be in

cient capacity to carry the containerized cargo which the Com

wealth s plans contemplate in working out a solution to Puerto R

terminal facilities problem Itis not clear to what extent Bul

Alcoa will provide more container capacity 6

In view of the foregoing we find that the grant of permi

to applicant to continue its weekly containership operation i

North Atlantic Puerto Rico service would not result in unfair 

petition to exclusively domestic operators The service prov

by applicant is needed in order that the trade be adequately se

D Objects and policy of the Act

vVe agree with the examiner that grant of permission to app

for the continuation ofthe North Atlantic Puerto Rico service w

not be prejudicial to the objects and policy oftheAct Shippers 

6 Bull s witness McCarty testified tbat Bull feels for the present that with th

and containers now in use maximum containerization under the circumstances ha

f

lcompl1shed In the North Atlantic Puerto Rico trade

6 F 
WATERMAN S S CORP SEC 805 a APPLICATION 125

indicated a need for acceptance of and reliance upon the service pro

vided by Pan Atlantic The PortAuthority ofthe Commonwealth of

Puerto Rico believes the service is essential to enable it to work out a

solution of the Commonwealth s terminal problems Containership

operation admittedly is more efficient and tends towards reducing costs

of operations Under such circumstances if we were to deny to

Puerto Rico dependent to such a

large extent on ocean transportation

the service of applicant it would in our opinion be prejudicial to the

objects and policy oftheAct

III JACKSONVILLE PUERTO RICO JACKSONVILLE NEW YORK SERVICES

A Grandfather rights

As indicated above Pan Atlantic operates a two vessel weekly

trailership service from Port Newark New Jersey to San Juan Ponce

and Mayaguez Puerto Rico thence to Jacksonville Florida for dis

charge and loading ofPuerto Rico cargo and loading of PortNewark

cargo to Newark Ithas no grandfather rights in these trades since

itonly began to call its New York Puerto Rico vessels at Jacksonville

on Janpary 18 1959 Service was not provided in 1935 between

Jacksonville andPuerto Rico or from Jacksonville to New York

B Exclusively coastwise services

TMT TrailerFerry Inc T 1T which has been providing service

between Jacksonville and San Juan since early in 1956 contends that

it has adequate equipment and service to handle all the traffic moving

between Jacksonville and Puerto Rico with the exception of reefer

cargo its management has considered the acquisition of further equip

ment when and ifwarranted Itowns three vessels only two ofwhich

are utilized because oflack of sufficient available tonnage Itusually

operates two barges which are towed by tugs used principally in the

movement of loaded truck trailers in what is called a roll on roll off

type of operation These sailings vary and are not at regular inter

vals The tug and barge operation cruises at an average speed of 10

knots and requires 6 1h days transit time from Jacksonville to San

Juan a distance ofabout 1 100 nautical miles Itprovides no pick up

or delivery service in the United States but does provide such service

in San Juan Two thirds of the freight received by TMT at Jackson

ville is rehandled by transfer from trailers of other carriers into those

of TMT It has no reefer equipment and handles no reefer cargo

TMT is an exclusively coastwise operator entitled to protection from

unfair competition

6 F MB
126 FEDERAL MARITIME BOARD

o Unfair competition

There is shipper testimony that TMT s service involves less 

dling that its rates are substantially below those of conference v

and that T 1T shipments are not subject to the many termina

culties prevailing in San Juan Other shippers testified tha

could not use T 1T s service because cargo was exposed to the s

and therefore rusting that shipments were so badly damaged be

of salt air corrosion that they could not be sold when received 

other paper cargo products were exposed to excessive damage 

T 1T s service was erratic and not dependable and that its failu

provide reefer service was serious 7

There was other shipper 

mony in support of the continuance of the Pan Atlantic traile

service between Atlantic ports and Puerto R ico pointing u

superiority of the service over that of TMT 8

vVhile T 1T con

that it can handle all the cargo in that trade with presently ut

vessels and that it has a thirdvessel which it can put into service 

and if conditions justify it the record shows that in 1958 18 ofT

33 sailings went out full that all of the sailings with less than 90 

cent utilization except one occurred in the off season betwee

middle of July and the beginning of September and that TM

been operating at capacity southbound notwithstanding Pan Atla

entry into the trade in January 1959 vVhile T 1T claims that 

a third vessel for use if additional cargo offers this third vessel is 

as a rule only when one of the two vessels regularly in use is o

service for inspection and it will be committed to the trade on a 

manent basis only when and ifthere is sufficient northbound ca

make it attractive to T 1T leaving the servicing of the heavy s

bound trade subject to cargo offerings in the lighter northbound t

The service of Pan Atlantic is needed in order to provide regula

adequate service in the JacksonvillejPuerto Rico trade Ve find 

the granting of permission to continue a two vessel weekly traile

service from Port Newark N J to San Juan Ponce and Maya

P R thence to Jacksonville Florida for discharge and loadi

PortNewark cargo to Newark would not result in any unfair com

tion toTMT

D Objects and policy of the Act

TMT provides no reefer space from Jacksonville to Puerto 

7

Jacksonville Traffic Bureau representative testified as to the urgent needs fo

servIce

8

Such as reduced damage and pIlferage experIence moreexpedItious loadIng and 

Ing availability of trailers permitting shipper control of loading and unloading 

abUity of reefer equipment reduction In handling of cargo faster outturn of pe

cargo and availability of trailer service at areas other than port areas

6 F 
WATERMAN S S CORP SEC 805 a APPLICATION 127

although there is a widespread demand for it such a service is

supplied principally by Pan Atlantic In addition T 1T has been

operating at fullcapacity southbound notwithstanding Pan Atlantics

entry into the trade in January 1959 thus indicating that the latter s

service is needed to give shippers adequate service in the trade vVe

find that the grant ofpermission to applicant to continue such service

would not be prejudicial to the objects and policy of the Act

IV NEW YORKTAMPA NEW ORLEANS 1IAMI NEW YORK

SERVICE

A Grandfather rights

Pan Atlantic inaugurated its service in 1933 with four vessels pro

viding weekly calls at New York and Ne v Orleans and other ports

not including however 1iami or Tampa In 1035 the period for

measuring grandfather rights Pan Atlantic had 53 sailings be

tween New York and New Orleans but did not call at 1iami and

Tampa and thus has no claim to grandfather rights with respect

to these latter two ports From 1935 to the present time the numLer

of vessels used in this service has ranged from three to seven From

May to December 1957 the service was temporarily suspended while

the vessels were taken out of service for conversion to trailerships

The vessels provided annual calls ranging generally from 53 in 1935

an average of 135 annually from 1937 through 1941 and thereafter

in excess of 50 annually In the first half of 1958 there were 28 calls

Seatrain contends that Pan Atlantic does not have grandfather

rights covering the southbound leg of this trade It argues that the

break in service from 1ay through December 1957 when the vessels

were out for conversion from break bulk to trailership was a volun

tary act and not due to circumstances beyond the control of Pan

Atlantic Seatrain states that Pan Atlantic could have continued

to provide service with other break bulk vessels or could have pro

vided service with modified T 2 tankers It points out that service

wasprovided IIouston with the latter type vessels Ve find that the

break in service between 1ay and December 1957 did not destroy Pan

Atlantic s grandfather rights The conversion was necessary for

survival in the New York New Orleans trade and provided a new

service There was no intention to abandon the service the vessels

were at all times earmarked for this service and were not used in

any other Conversion wasameans to the continuation ofthe service

Ve find that Pan Atlantic has grandfather rights in the south

bound leg of the New YorkiNew Orleans trades to the extent of

53 voyages using not more than four vessels

6 F M B
128 FEDERAL MARITIME BOARD

Pan Atlantic did nat hawever accept carga far and discant

its narthbaund service fram New Orleans ta New Yark fram A

1955 ta January 1958 This break in service daes nat appear ta 

been beyand the cantral of the carrier 01 ta have been an esse

step in the improvement ar Pan Atlantics Tuture caastwise se

the suspensian af service was a

valuntary ane and canstitute

abandanment Pan Atlantics narthbaund service in its New Or

t0 New Yark trade is nat cavered by any grandfather rights 

therefare is necessary ta determine whether an award of se

805 a permissian cavering this narthbaund service wauld res

unfair campetition ta an exclusively caastwise service 01 be pre

cial ta the abjects and palicy af the Act

B Exclusively coastwise services

Seatrain in the trade since 1932 0perates an exclusively C

wise service from New Orleans t0 New Yark This is nat cante

O Unfair competition

Pan Atlantic reentered this trade in January 1958 aIter b

0ut since April 1955 In 1956 Seatrain then praviding the anly 

Orleans ta New York ocean service carried 104 000 tons af car

appr0ximately 2 500 rail cars Spaces far appraximately 850 

01 an average 0f 16 cars per sailing were not utilized In 

Seatrain carried 103 000 tans and Pan Atlantic carried an estim

11 000 tans far a tatal movement in the trade of abaut 114 000 

The t0tal 1958 traffic exceeded that af 1956 by about 9 800 

Seatrain s 1956 vessel capacity as such was sufficient t0 have ca

all the carg0 which m0ved in the trade in 1958 Pan Atlanti

pr0jected a traffic figure 0f 41 000 t0ns Tar 1959 Ifthis figu

added t0 Seatrain s 1958 traffic oT abaut 103 000 tons then Seat

1956 capacity ar abaut 138 000 tans cauld have moved all but a

6 000 tans If Pan Atlantic does carry 41 000 tons in 1959 w

is abaut 30 000 tans mare than itcarried in 1958 at least a gaad 

of the 6 000 tons wauld na doubt be diverted from Seatrain U

these circumstances it appears that Seatrain as or the present 

can pr0vide sufficient tannage t0 serve the New Orleans t0 New 

trade adequately

The remaining questian is whether in additi0n t0 the Sea

service the Pan Atlantic cantainer service is needed t0 serv

trade The combined tannage carried by b0th in 1958 was 

than that carried by Seatrain alane in 1957 114 076 t0ns in 

and 121 278 tons in 1957 Pan Atlantic has n0t

generated as 

traffic f0r water carriers an this r0ute as it has 0n the other r

where it 0perates and it does n0t

appear that this will ohan

6 F M 
WATERMAN S S CORP SEC 805 a APPLICATION 129

the future Few shipper witnesses indicated that they were switching

over to Pan Atlantic OT that they had any strong preference for its

service Moreover to the extent the service is needed Seatrain claims

itwill extend its Seamobile service and already has agreements with

railroads looking to the carrying out of such plans We find that

Pan Atlanticparticipation here is not needed to serve the northbound

trade adequately

D Objects and policies of the Act

Seatrain needs the cargo moving from New Orleans to New York

and has capacity and ability to provide adequate service now and

in the foreseeable future Permission under section 805 a should

be denied where the record supports such a finding A morchant

marine sufficient to carry our domestic water borne commerce and

to provide service on this route essential for maintaining the flow

of such domestic water bornecommerce at all times would be fostered

by protecting the service Seatrain has built up and needs for its suc

cess against the added competition ofPan Atlantic

We find that the grant of permission to Vaterman for its sub

sidiary Pan Atlantic to engage in the New Orleans to New York

domestic trade would be prejudicial to the objects and policy of the

Act The continuation by Pan Atlantic of its service to Miami

Tampa and Jacksonville from and to New York would not result in

unfair competition nor be prejudicial to the objects and policy of

the Act Such permission is granted

V NEW YORK HouSTON SERVICE

A Grandfather rights

While Pan Atlantic did not commence service in this trade until

1953 it claims grandfather rights on the basis of its service in

1935 from New York to the Gulf In 1935 Pan Atlantic did not

serve any Gulf port west of New Orleans nor was any such port

served until 1953 vVe find that Pan Atlantics New York Houston

service is not covered by grandfather rights

B Exclusively domestic service

Seatrain the only other water carrier in the New York Houston

trade is operating exclusively in the coastwise trade within the

meaning of section 805 a and permission may not be granted to

Pan Atlantic under that section if we find such permission would

result in unfair competition to any person firm or corporation

operating exclusively in the coastwise or intercoastal service

6 F M B
130 FEDERAL MARITIME BOARD

O Unfair competition

Seatrain s traffic began to fall off noticeably in 1956 after 

A

tlantic s converted tankers were put into service as trailer

between Houston and New York and the decline became 

pronounced in the fall of 1957 after Pan Atlantic introd

its fully converted trailerships There is testimony from shi

that they had diverted cargoes from Seatrain to Pan Atlantic 

does not appear however that Seatrain has the physical capac

carryall of the traffic which now moves in the trade In 1956 

all of Seatrain s vessels were employed it utilized some 8 350 ra

spaces and had 1 277 free spaces northbound Southbound itut

8 255 railcar spaces and had 1 366 free spaces The northboun

pacity therefore was 9 626 railcars loading an average of 39 3 

southbound it was 9 621 railcars loading an average of 29 3 

Seatrain s total capacity duringthat year appears to be approXim

378 000 tons northbound and 282 000 tons southbound In 1958 

its vessel utilization was comparatively low Seatrain s traffic dro

to 242 000 tons northbound

Pan Atlantic s traffic for the first six months of 1958 when i

still developing its service was about 60 000 tons or approxim

120 000 tons northbound on a full year s basis Southbound it 

ried 64 000 tons for the first six months of 1958 A total of 

361 000 tons of cargo was moved by Pan Atlantic and Seatra

1958 This is about 17 000 tons less than Seatrain s absolute cap

and under ordinary operating conditions it appears doubtful 

Seatrain could have carried all of it Pan Atlantics traile

service was new during the last half of 1958 and its manag

states that it will carry approximately 164 000 tons northbound d

1959 Actually from February 21 to March 14 1959 the latest p

of record Pan Atlantic moved cargo at the above rate Ifthis 

mated 1959 traffic is added to Seatrain s carryings in 1958 a 

of some 406 000 tons is indicated in 1959 and this presently estim

northbound volume would be approximately 28 000 tons greater 

Seatrain s capacity Southbound Seatrain carried 150 000 to

1958 and Pan Atlantic carried 128 000 tons for a total of 27

tons This is about 3 500 tons less than Seatrain s theoretical cap

Pan Atlantic expects to move 196 000 tons in 1959 and has in 

carried southbound traffic at this rate for the most recent four 

period of record Ifthis traffic is added to Seatrain s 1959 vo

of 150 000 tons a southbound total of some 346 000 tons is indic

in 1959 this southbound total appears to exceed Seatrain s cap

by some 64 000 tons

6 F 
WATERMAN S S CORP SEC 805 a APPLICATION 131

Although some of Pan Atlantics traffic represents traffic lost by

Seatrain new traffic has been generated in the trade and seems re

flected in the figures set forth Pan Atlantic trailership service ap

pears to be a primary reason for generating much of this new traffic

The shipper testimony shows than Pan Atlantic has generated and

served a suhsta ntial demand rol

trailership service between New

Yark and Haustan CargO has been attracted away fram averland

carriers particularly the railraads because of lower rates reduced

damage to cargO and other advantages inherent in Pan Atlantics

new service It has provided reliable claor ta daar service otherwise

unavailable to cansignees and cansignars whO dO nat have rail sidings

Seatrain has carried railroad cars since 1932 In order to meet more

effectively Pan Atlantic s newer service and to meet the demands

of the trade Seatrain in November 1958 after extensive research

instituted its so called Seamabile service consisting of 27 faot vans

maving from the shipper in the port area to ship s side then laaded

on the regular Seatrain vessels at destinatian port they are dis

charged from the vessel and delivered to shippers in the part area

Service to shippers outside the port area presently is offered at

Haustan 8

but nat at New York New Orleans 01 Savannah althaugh

it is expected to be added later at thase places

Seatrain has 179 27 foot vans in the service These basically are

trailer badies capable of being demounted from highway chassis

Seatrain alsO uses in its Seamobile service some 93 special freight

bed chassis which are truck trailers without bax 01 van Faur af

Seatrain s vessels are modified by special insta 1latians to handle 64

Seamabile units simultaneausly with 76 railroad cars and canversian

af its remaining two vessels is now under way as is also the cam

pletian of the necessary terminal facilities at SavalUlah and New

Orleans far the institutian af Seamabile service as traffic needs dic

tate At the present time with a total af 179 vans of 27 feet Sea

train cannet pravide nearly as much trailer service as that presently

offered by Pan Atlantic with its 226 35 faat vans maving every week

in each direction Seatrain had no vans under canstructian at the

time of hearing and when and ifit daes acquire additional vans they

will have to be appartianed amang its Itouston Savannah and New

Orleans services Seatrain has averaged 5 4 laaded vans sauthbaund

and 2 8 loaded vans northbound between New York and Houstan

There is some testimany that the Seamobile units are unsuited far

certain purposes because Seatrain daes nat handle less than carlaad

shipments and the service is limited geagraphically

8

Seatrain actually docks at Texas City which is in the Houston port area

6 F M B

732 047 0 64 10
132 FEDERAL MARITIME BOARD

We find that bhe grant of permission to Pan Atlantic to co

its two vessel weekly service between PQrt Newark N J and HQ

Texas will hot result in unfair competition to Seatrain as a c

operating exclusively in the CQastwise service

D Objects and policy of the Act

Itis well knOwn that cOastwise shipping has IOng been in a st

decline Ve are charged with the duty under the Act and hav

resPQnsibility to encourage the revitalization Ofsuch shipping a

fQster the develQpment Of

a

strQng and adequate coastwise fleet 

plicant has expended large sums Qf mQney in cQnverting vesse

use in the cQastwise trade The cQnverted vessels represent a fO 

step in meeting the needs Qf shippers increasing efficiency an

ducing COst Ve find that the grant Qf permissiQn fQr Pan At

to cQntinue its tWQ vessel weekly service between PQrt Newar

HQustQn WQuld nQt be prejudicial to the Qbjects and PQlicy Qf the 

Indeed Qn the cQntrary the denial O fsuch permissiQn in QUI Op

WQuld be prejudicial to the Qbjects and PQlicy Ofthe Act fQr an Q

tQr nQt already subsidized WQuld nQt cQnsider the expenditure Qf 

to improve its vessels used in the dQmestic service if it knew thw

later shQuld seek Operating subsidy aid it WQuld have to give 

cQastwise service even thQugh adequate capacity in meeting the 

O fshippers wasnQt Qtherwise available

FINANCIAL

One Qf the exceptiOns is that the examiner failed to recQmm

finding that applicant s financial QhligatiQns will result in a dive

Of

subsidy payments to supPQrt the prQPQsed cQastwise 01 intercQ

OperatiOns It is cQntended that applicant and its cQrpQtate pa

cLean depend On the payment Qf subsidy in Qrder to discharge 

financial obligatiQns entered into fQr Pan Atlantic s benefit 

plicant s QbligatiQns are to lend CQastal Ship CQrpQration m

needed to discharge any QbligatiQns CQastal may incur with ce

exceptiQns and to maintain certain minimum net current assets 

consolidated net current assets CQastal acquired five trailerships 

certain bQrrQwed funds and has demise chartered them to app

and Pan AtlanticjQintly Pan Atlantic Operates the ships unde

charter frQm applicant Pan Atlantic pays charter hire to app

and Qwes applicant mOney on nOtes On which it pays subst

interest The principal Ofthe notes cOvers defaulted charter hire 

ments FrQm this itmay be seen that nO mQney subsidy 01 Qthe

is paid by applicant to the intercQastal QperatQr Pan Atlantic 

6 F M 
WATERMAN S S CORP SEC 805 a APPLICATION 133

ments are all to applicant The only benefit that appears is that if

Pan Atlantic fails to pay either charter hire money or interest ap

plicant because of its improved financial position as the result of

receiving subsidy will be able to withstand adverse effects of any fail

ure to make such payments when due Pan Atlanticalready has failed

to pay charter hire and allegedly will lose money on its entire opera

tion Applica nt also has failed in the past to maintain prescribed

current asset levels This is said to be equivalent to a threat of as

sistance from subsidy from applicant Such threat is said to be a bar

to grant of permission to operate affiliates in the domestic trade

Under the second paragraph of section 805 a it is unlawful to

divert directly or indirectly any moneys property or other thing

of value used in foreign trade operations for which a subsidy is paid

by the United States into a

ny such coastwise or intercoastal oper

ations The surmises as to the support or benefit given by

subsidy particularly in case of default appear to be quite speculative

and far short of diversion Allofthe services for which section 805 a

permission is sought are to be operated as separate and distinct

services from those which vVaterman proposes to operate under sub

sidy There is no competitive unfairness where the subsidy will not

even indirectly be used in the domestic affiliate s operations at least not

under the remote and speculative circumstances dealt with by inter

veners More than threats and speculations are required to show in

direct use of subsidy money for domestic operations by an affiliate

of an applicant for subsidy Other arguments reI ed to the com

mingling of subsidy and other funds and the use of subsidy money

for nonsubsidy purposes if applicant s resources are called on for

other obligations cannot be accepted The Board will see to it that

no diversion of subsidy occurs and that the requirements on appli

cant under any loan agreements are separate distinct and above

those required for subsidy purposes

RAILROADS AS INTERVENERS

Three railroads intervened and two of them participated in the

proceeding They contend that one ofthe issues is the effect on their

business ofany permission granted under section 805 a and whether

section 101 containing a statement of the objects and policy of the

Act governs our authority to act if such action affects the railroads

Section 805 a expressly applies only to any person firm or corpo

ration operating exclusively in the coastwise or intercoastal service

the objects and policy stated in section 101 apply to the merchant

marine and its encouragement and maintenance The Act containsl6

F M B
134 FEDERAL MARITIME BOARD

no limitation or directive which authorizes the Board to conside

impact ofits decisions on land orairtransportation ofany kind 

arguments of this nature must be addressed either to other regul

agencies or to Congress Ve are powerless to consider the facts 

sented by the railroads

OTHER PERMISSIONS

vVaterman as a contractor under title VI of the Act also 

written pennission to charter the Olairborne and the 1onarch o

Seas to Vaterman P R for operation between Gulf ports and P

Rico The award or payment of subsidy to a

pplicant contrac

unlawful unless written permission for chartering vessels eng

in the domestic intercoastal service is given by the Board Se

to Puerto Rico is such intercoastal service The charters run for 

years from 1arch 1 1959 and are renewable The charter h

2 200 per day which is at least as high as the going market ra

the date of the charter agreement and higher than later rates 

unfair competition from excessively advantageous costs to the 

peting line appears to exist and no prejudice to the objects and p

oftheAct have been shown

Vaterman also asks written permission to charter the Bie17

Raphael Semxmcs Fairlancl Azalea Oity and Gatc1 ay Oity to 

Atla ntic for operation between ports on the Atlantic and Gulf c

and in the Atlantic Puerto Rico trade Actually this is a subch

from Vaterman vVaterman is not the owner of the vessels but 

ters them jointly with Pan Atlantic from their owner Coastal 

Corporation by demise charter dated September 30 1957 Suc

mise charter WaS made contemporaneously with a loan and su

nation agreement in connection with an issue of debt securitie

Coastal to finance the purchase of the five vessels upon comp

of their conversion into C 2

containerships The vessels wereb

from Taterman pursuant to an agreement of September 30 

Pan Atlantic assigned to Vaterman its right in the demise ch

and thereafter entered into a subcharter agreement for the ope

of the vessels in any trade throughout the world No part o

sidy funds could lawfully be used to meet the obligations ofthe re

companies Applicant s charter was made for the purpose of 

ing certain financial requirements related to Coastal s debt finan

not for the purpose of providing any subsidy aided competition 

charter rates appear reasonable and involve over a ten year p

a

complete return of the entire purchase price paid by Coastal 

transactions do not involve any factors which would amount to u

6 F 
WATERMAN 8 8 CORP 8E C 805 a APPLICATION 135

competition to existing intercoastal operators Continuance of the

charter by Vatermun is therefore permitted

Applicant acts as general agent for Vaterman P R in the United

States and asks for permission to continue the relationship and its

pecuniary interest in the latter which otherwise would be unlawful

under section 805 a After entering into a contract for subsidy

applicant ill be paid 8 percent on outbound and inbound traffic in

comparison with 6 percent of the freight revenues accruing on traffic

from the United States to Puerto Rico and 3 percent on traffic moving

to the United States from Puerto Rico One ofthe interveners under

a similar intercompany agency arrangement receives 7 percent and

3 percent for such traffic and another under a limited agency pays

generally in the United States only 2Y2 percent Under its arrange

ment applicant is not giving the affiliate operating vessels in inter

coastal service any unfair competitive advantage on such service

Permission to retain the agency may be given

Then and if vVaterman commences subsidized operations in the

absence of any later action by the Board this report sha11 serve

as written permission under section 805 a for

1 Waterman Puerto Rico to operate a weekly twovessel service between

New Orleans Mobile and Puerto Rico

2 Pan Atlantic to operate a two vessel weekly trailership or containership

service between Port Newark and Puerto Rico with calls at Jacksonville for

discharge and loading of Puerto Rico cargo and loading of Port Newark cargo

to Port Newark

3 Pan Atlantic to operate not more than four vessels and 53 voyages in

southbound service between New York and New Orleans including calls at

Miami Tampa and Jacksonville

4 Pan Atlantic to operate a two vessel weekly trailership service between

Port Newark and Houston

5 Waterman to charter the Clai rborne and the Monarch Of The Seas to Water

man Puerto Rico

6 Waterman to charter the Bienville Raphael Semmes Fairland Azalea City

and GateWay City to Pan Atlantic

7 Waterman to act as agent for Waterman Puerto Rico

After the matter had been submitted on April 13 1960 Erie and

St Lawrence Corporation filed a petition on July 22 1960 to inter

vene and to reopen the proceeding Rule 5 n of the Rules of Prac

tice and Procedure provides that iffiled after hearing has been closed

it a petition for intervention will not be granted ordinarily Ac

cordingly the petition is denied On our own motion however we

will set down for further hearing the question of continuing the per

missions granted herein insofar as they involve service between Jack

sonville and New York Port Newark

6 F M B
ApPENDIX

Section 805 a

It shall be unlawful to award or pay any subsidy to any contr

authority of title VI of this Act or to charter any vessel to any p

title VII of this Act if said contractor or barterer or any holdin

subsidiary affiliate or associate of such contractor or charterer o

director agent or executive tbereof directly or indirectly shall o

or charter any vessel or vessels engaged in the domestic intercoastal 

service or own any pecuniary interest directly or indirectly in an

concern that owns charters or operates any vessel or vessels in t

intercoastal Or coastwise service without the written permission 

mission Every person firm or corporation having any intere

application shall be permitted to intervene and the Commission s

hearing to the applicant and the intervenors The Commission sha

any such application if the Commission finds it willresult inunfair 

to any person firm or corporation operating exclUSively in tbe c

intercoastal service or that it would be prejudicial to tbe Objects a

thisAct PrO Villed That if such contractor or other person aboved

a predecessor ininterest was inbona fide operation as a common carr

in the domestic intercoastal or coastwise trade in 1935 over the rou

or in the trade or trades forwhich application is made and has so op

that time or if engaged in furnishing seasonal service only was 

operation in 1935 during the season ordinarily covered by its opera

in either event as to interruptions of service over which the app

predecessor in interest had no control the Commission shall gran

mission without requiting further proof that public interest and 

will be served by such operation and without further proceedings 

competition in such route or trade

Ifsuch application be allowed it shall be unlawful for any of 

mentioned in this section to divert directly or indirectly any money

or other thing of value used in foreign trade operations for which 

paid by the United States into any such coastwise or intercoastal 

and whosoever shall violate thisprovision shall be guilty of a misdem
WATERMAN S S CORP SEC 805 a APPLICATION 137

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 1st day of December A D 1960

DOCKET No S 73

WATERMAN STEAMSHIP CORPORATION ApPLICATION UNDER

SECTION 805 a

Whereas the Board on September 13 1960 served its report hereIn

and

Whereas the Board in accordance with said report desires on its

own motion to set down for further hearing the question ofcontinuing

the permissions granted therein insofar as they involve service between

Jacksonville Florida and New York Port Newark New York arid

Whereas the Board pursuant to section 25 of the Shipping Act

1916 as amended 46 US C sec 824 has authority upon its own

motion to reopen the proceeding

Itis therefoJ e ordered That the proceeding be and it is hereby set

down for further hearing and

It is further ordered That in accordance with Rule 6 d of the

Board s Rules of Practice and Procedure 46 CFR S 20194 a pre

hearing conference shall be held before an examiner on January 10

1961 beginning at 10 00 a m in Room 4519 of the new General

Accounting Office Building 5th and G Streets N V Vashington

D C Any interested party may file a petition to intervene

By the Board

Sgd THOMAS LISI

S ecreta lY

6 F M B
FEDERAL MARITIME BOARD

No 819

ABSORPTION OR EQUALIZATION OF INLAND FREIGHT CHARGES 

CONNECTION WITH TRANSPORTATION BY WATER OF EXPLOSIVES

SubmittedA priZ 19 1960 Decided September 16 1960

Respondent E I du Pont de Nemours and Company found to have know

obtained transportation by water for shipments of explosives at less 

the rates or charges otherwise applicable by means of an unjust or u

device in violation of section 16 of the Shipping Act 1916

Respondents Pacific Far East Line Inc and Grace Line Inc found to 

allowed E I du Pont de Nemours and Company to obtain transpor

for explosives at less than the regular rates by means of an unju

unfair device or means to have given undue or unreasonable prefe

or advantage to the shipper or subjected other shippers of explosiv

undue or unreasonable prejudice or disadvantage or to have unjustl

criminated between shippers of explosives in violation of sections 1

17 of the Shipping Act 1916

Edwin B Oonnolly William H Atack and Robert Furness 

E IduPont de Nemoursand Company

William Ross Wallace William R Ray and Russell Lutz for G

Line Inc

John Hays forPacific FarEast Line Inc

Leonard G James for R F Burley appearing under subpo

Robert J Blackwell Robert E Mitchell and Edtward Aptake

Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Jr Vice Ohairman and SIGFRID B UNAN

Member

By THE BOARD

This is an investigation instituted on the Board s own motion 

suant to section 22 of the Shipping Act 1916 the Act 46 U 

821 to determine whether E 1 du Pont de Nemours and Com

138

6 F M 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 139

du Pont knowingly and willfully directly or indirectly by means

of an unjust or unfair device obtained or attempted to obtain from

Pacific Far East Line Inc PFEL and Grace Line Inc Grace

transportation by water for shipments of explosives at less than the

rates or charges otherwise applicable in violation of section 16 of

the Act and whether PFEL and Grace allowed du Pont to obtain

such transportation at less than the regular rates or charges then

established and enforced on their lines by means of an unjust or

unfair device in violation of section 16 Second of the Act and in so

doing gave undue or unreasonable preference oradvantage to duPont

or subjected other shippers of explosives to undue or unreasonable

prejudice or disadvantage in violation of section 16 First ofthe Act

or unjustly discriminated between shippers of explosives in violation

of section 17 ofthe Act

Hearing was held before an examiner at San Francisco California

Inhis recommended decision hefound

1 That du Pont knowingly and willfully obtained transportation by water

for certain shipments of explosives at less than the rates or charges otherwise

applicable by means of an unfair or unjust device in violation of section 16

of theAct

2 That PFEL and Grace have not been shown to have allowed du Pont to

obtain transportation for explosives at less than the regular rates or charges

established and enforced on their lines by means of an unjust or unfair device

or to have given undue or unreasonable preference or advantage to du Pont or

subjected other shippers of explosives to undue or unreasonable prejudice or

disadvantage in violation of section 16 of the Act nor have they been shown

to have unjustly discriminated between shippers of explosives in violation

ot section 17 of theAct

Exceptions to the recommended decision and replies thereto were

filed and oral argument washeard Exceptions and proposed findings

not discussed in this report nor refl cted in our findings have been

considered and found not justified

PFEL operates as a common carrier subject to the Act from west

coast ports to the Far East including the Philippine Islands and

is a member of Pacific Westbound Conference Grace operates as a

common carrier subject to the Act from west coast ports to west

coast ports ofCentral and South America and is a member of Capca

Freight Conference and Pacific West Coast of South America Con

ference Du Pont manufactures explosives at a plant located on tide

water adjacent to the town of Du Pont Washington and the ship

ments here involved were made from this plant to Philippine and

west coast of Central and South American destinations during the

period 1953 1957 inclusive via PFEL and Grace

6 F M B
140 FEDERAL MARITIME BOARD

Du Pont s plant facilities include a deep water pier adequa

accommodate ocean going vessels and a

company owned narrow g

rail line connecting the plant and the pier Priorto and during V

War II shipments of explosives to foreign destinations were lo

directly at the pier Since the war du Pont has requested si

direct service at its pier from PFEL and Grace respondent

in the alternative Puget Sound direct loadings at Blake Island 

explosives anchorage established by the United States Army Cor

Engineers Blake Island is located about 25 nautical miles northo

Pont Except in one instance a

shipment of explosives loade

Blake Island by Grace both Grace and PFEL have refused to 

explosives from Puget Sound direct offering to du Pont in 

thereof service out of San Francisco under equalization in the 

of PFEL and under transshipment in the case ofGrace as autho

by conference tariffs

The practices of equalization or transshipment as such are n

issue here So far as the record discloses equalization on explo

was discontinued by PFEL in the latter part of 1956 and trans

ment of explosives was discontinued by Grace early in 1957

Explosives are particularly difficult for carriers to handle 

are liable to damage other cargo the vessel itself and are offe

to passengers The circumstances under which a

ship may be lo

with explosives are rigidly controlled by safety regulations an

strictions of the United States Coast Guard Vessels may be lo

with explosives only upon issuance of a Coast Guard permit 

Coast Guard frequently invokes restrictions against the loadin

explosives unless the location for loading is in compliance with 

American Table of Distances orother similar table

Except rut Los Angeles Harbor California yhere a vessel lo

with no more than 300 tons of explosives may use the Outer IT

dock at San Pedro no vessel with explosives aboard may dock 

port on the Pacific coast Ifa southbound vessel ofGrace were to 

explosives atPuget Sound for delivery in SouthAmerica for exa

and called at San Francisco en route it would be required to pro

first to Anchorage 14 in San Francisco Bay the designated explo

anchorage arrange fortugs lighters and watchman service disch

the explosives to lighters and then proceed to San Francisco 

terminals Upon departure from the last terminal the explo

would be reloaded at Anchorage 14 This makes for an extre

costly operation

Recognizing the difficulties inherent in the handling and car

of explosives the conference tariffs effective during the period 

6 F M 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 141

involved established special conditions relatingthereto Pacific Vest

bound Conference tariffs I V 1 vV and I X provided in Rule No 33

The Ocean Carrier shall have the right to refuse to accept any cargo offered

for shipment which is liable to damage other cargo the v ssel or prove offensive

to passengers

Capca Freight Confelenceancl Pacific Vest Coast or South Amer

ica Conference tariffs have identical provisions Capca Freight Con

ference tariff No 2 provided in Item 11 A

Explosives inflammable or other Da ngerolts and Hazardolt8 Ca1 UO or cargo

of objectionable nature including Creosoted Lumber Piling and Timber will

be accepted and transported only at Carrier s option and subject to special

booking arrangement with individual carrier

All of the tariffs named specific rates on explosives Grace and

PFEL claim the right under the tariff to refuse shipments of ex

plosi ves tendered at a particular port or fora particular vessel In

practice however they have cooperated with explosives shippers in

making mutually satisfactory arrangements for the movement of

shipments offered and as far as the record shows no such shipments

have failed to move in some manner though perhaps not at the times

nor upon the vessels requested initially by the shippers The rates

applied were those named in the tariffs and standard forms of bills

of lading were executed No special contracts are entered into with

the shippers for movement of explosives Shipments tendered by

explosives shippers otherthan du Pont five in the case of PFEL and

28 in the case of Grace are handled in like manner

During the period here involved 56 shipments of explosives moved

from the du Pont plant to destinations in the Philippines and the west

coasts of Central and South America over the lines of PFEL and

Grace They werecarried in regular berth vessels which were adver

tised for the carriage of general cargo not excluding explosives Of

these shipments 38 were carried by PFEL and ranged from 3 1 to

469 tons I averaging 180 tons The remaining 18 shipments carried

by Grace ranged from 776 pounds to 427 tons averaging about 100

tons All of the shipments moved by rail or truck to San Francisco

and thence were barged to the explosives anchorage where they were

loaded aboard the vessels Du Pont paid ocean freight at the appli

cable rates named in the conference tariffs and also paid initia lly the

full delivery costs from its plant at Du Pont to vessel at Anchorage

14 in San Francisco Bay Periodically after shipments were made

du Pont then billed PFEL and Grace pursuant to the equalization

and transshipment uTangements for reimbursement of the cost of

1

When used herein the word tons means short tons of 2 000 pounds

6 F M B
142 FEDERAL MARITIME BOARD

movement of the shipments from its plant to vessel at San Franc

less 10 96 Reimbursement by the carriers was thereupon mad

billed except on three shipments by PFEL on which the paym

are being held in abeyance and on three shipments by Grace on w

reimbursement of the total cost of inland movement was made w

out deduction of the 10 96 allowance

Itis the allowance of 10 96 which is in issue here Purport

itrepresents the cost per shipment to du Pont for movement from 

plant to Blake Island the preferred point for loading explosives 

direct service from Puget Sound been offered by the carriers 

first of the shipments were destined to the Philippines Then 

were offered to PFEL and direct service from Puget Sound 

requested by duPont PFEL declined to provide such direct se

offering instead to provide service out of San Francisco under eq

zation as then authorized in the conference tariff Pacific Vestb

Conference tariff then in effect provided in Rule No 2 so fa

pertinent

Subject to Rules 5 7 9 not pertinent herein rates are based on 

loading at loading ports or locks but the individual Member Line Carrie

meet the competition of other Member Lines loading direct at Terminal 

or Docks either by trans shipment or by equalization from point of origi

Equalization is the absorption by the Carrier of the difference between 

per s cost of delivery to ship s tackle at Terminal Dock at nearest Confe

Terminal Port and the cost of delivery to ship s tackle at Terminal Doc

Port of equalizing line

The tariff named equal rates to the Philippines from Puget S

ports and San Francisco subject to a specific requirement tha

rates would apply from Du Pont on minimum quantities o

revenue tons Officials ofPFEL explained to officials of du Pont 

under the equalization rule PFEL could absorb the cost of in

movement from the du Pont plant to vessel at San Francisco les

cost to du Pont of moving the shipments to Blake Island Ac

ingly du Pont was requested to furnish information concerning 

Du Pont Blake Island cost This cost wasthen calculated by du 

as 10 96 per shipment regardless of size representing the co

fuel oil consumed by the l1V DuPont owned by du Pont which w

be utilized by it in performing the delivery from its plant to B

Island Recognizing the lowness of the allowance figure officia

PFELinquired as to the possibility that other costs might be invo

such as labor costs and suggested that the cost per shipment m

vary according to the size of the particular shipment but 

assured by officials of du Pont that delivery to vessel at Blake Is

6 F M 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 143

would be accomplished with owned equipment and that labor would

be provided by du Pont personnel employed on a monthly wage basis

payable in any event Thereupon PFEL accepted the assurances and

the allowance of 10 96 was used in determining the liability ofPFEL

to du Pont for reimbursement of inland costs from Du Pont to vessel

at San Francisco

In 1955 when PFEL in compliance with a revised Pacific Vest

bound Conference rule requiring that equalization invoices be sub

mitted to the conference for approval before payment began the

preparation of the required reports to the conference the accuracy

of the 10 96 figure was again put up to du Pont particularly with

respect to the ownership of the equipment and the possibility that

extra labor expenses might be incurred and again PFEL received

assurance from du Pont thatthe only extra cost that would be incurred

would be the 10 96 per shipment These facts were reported to the

conference and the equalization payments less the 10 96 allowance

were approved by the conference

About the middle of 1953 du Pont offered to Grace the first of the

explosives shipments to the west coasts of Central and South America

and requested direct service from Puget Sound Grace likewise

refused such direct service but offered to provide service out of San

Francisco under transshipment as authorized by the conference tariffs

At the time Capca Freight Conference and PacificlVest Coast of

South America Conference tariffs contained no rates applicable on

explosives from Puget Sound to Central and South American ports

the only rates published applying for direct loading from San Fran

cisco and Los Angeles The tariffs so far as pertinent contained a

general rule that rates would apply from the Puget Sound ports of

Seattle and Tacoma Vashington that unless otherwise provided the

rates named would apply also from Pacific coast ports otherthan those

mentioned when prior arrangements had been made with the indi

vidual carriers and the vessel called direct to load thereat and that

in the event any carrier found it undesirable for operating reasons to

make a direct call at the portsof Seattleand Tacoma the carrier might

effect transshipment between those ports and San Francisco at vessels

expense The tariff did not provide for similar transshipment at

vessels expense between Du Pont and San Francisco

It was ascertained that the cost of inland movement from Puget

Sound to San Francisco would be about 22 per ton and accordingly

rates were established from Puget Sound to the Central and South

American destinations on a level 22 higher than the rates applicable

from San Francisco with the view of permitting transshipment and

6 F M B
144 FEDERAL MARITIME BOARD

still preserving to the carriers the full ocean revenue obtainab

of San Francisco Pacificl Vest Coast of South America Confe

rates were made subject to a note reading Rates apply froDl 

Sound loading subject to vessels ability to load Capca Fr

Conference tariff provided

From Puget Sound loading ports subject to vessel s ability to load rates 

over the rates from California ports stated below

In October 1956 recognizing that conflict might exist betwee

rate items and the general rules designating loading ports 

authorizing transshipment the rate items were amended to pr

that the rates would apply from Puget Sound loading direct c

transshipment vessels option and were specifically excepted 

application of the general rules It was subsequent to these a

ments that the three shipments moved on which Grace mad

reimbursement to du Pont for inland costs without taking the 

allowance An

ancillary issue arises as to the propriety of this 

tice and the proper application of the tariffs prior to the amendm

Itis clear that the conferences Grace and du Pont knew that 

the tariffs as first established direct calls at Du Pont for lo

explosives would in no event be made and that Blake Islan

designated explosives anchorage would be the preferred lo

point on Puget Sound Since the loading of explosives could 

a practical matter be accomplished at the ports of Seattle and Ta

it is concluded that the general rules should be interpreted so 

substitute Blake Island for Seattle and Tacoma as the loading 

for explosives as required by official pronouncements of governm

agencies and that under the tariffs prior to the amendments du 

under transshipment would be required to bear theexpense of de

from DuPont toBlakeIsland

Subsequent to the amendments however the rates applied 

Puget Sound ports including Du Pont and specifically auth

transshipment to San Francisco from Du Pont Thus du Pon

no longer required to bear the expense of delivery from Du P

Blake Island and reimbursement by Grace to du Pont of th

cost of inland movement from Du Pont to vessel at San Fran

without deduction of the 10 96 allowance was in accordance 

the tariff Early in 1957 when it was determined that inlan

penses from Puget Sound to San Francisco would exceed th

differential in the ocean freight rates the transshipment priv

were canceled from the tariffs and direct loadings only 

authorized

Before the first shipments moved to Central and South Am

officials of Grace and du Pont also had discussions concernin

6 F 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 1 15

delivery allowance of 10 96 intended to cover the cost to du Pont

ofdelivery from Du Pont to Blake Island The same assurances were

given Grace as had previously been given to PFEL Grace officials

in San Francisco forwarded the information to their superiors in New

York New York where additional discussions between traffic officials

of Grace and du Pont were had The elu Pont officials in New York

assured the Grace officials there that the figure was small because

du Pont used its own equipment but agreed that the figure would be

checked with du Pont headquarters at vVilmington Delaware As

surance was likewise received from du Pont headquarters that the

figure was correct and the allowance was thereupon approved by

Grace

The Du Pont is a wooden motor launch about 65 feet long and 27

years old It is used by du Pont for the delivery of explosives from

its plant to points on Puget Sound and also to points in southeastern

Alaska not accorded regular steamship service It is manned by a

crew of three whose aggregate monthly salaries are approximately

1 500 and has amaximum capacity of about 50 tons Although not

designed to tow other craft it has the power to pull a barge laden

with up to 250 tons of explosives Ifit does tow a barge it is still

capable of carrying a full cargo On occasion it is used by du Pont

to transport shipments for other explosives shippers in the Puget

Sound area moving from the du Pont dock to Blake Island or Port

1adison Washington but only when regular commor carrier service

by carriers operating in the Puget Sound area is unavailable On

such occasions the charge made by du Pont is the same as that made

by the common carriers Up to August 1955 the common carrier rate

on explosives from Du Pont to Blake Island was 85 cents per 100

pounds and thereafter was increased to 94 cents per 100 pounds

Only 10 ofthe shipments here involved were under 50 tons ranging

from 776 pounds to 47 tons and were within the capacity of the

DuPont On the shipments between 50 and 300 tons du Pont would

have had to rent a barge and set oftarpaulins at a daily cost of 18 50

in 1955 in order to effect delivery to Blake Island such rented equip

ment being available at Seattle In order to effect delivery of ship

ments in excess of300 tons du Pont would have had to rent two barges

and two sets of tarpaulins at a daily rental of 37 and would have

had to hire a tug to tow the second loaded barge at a minimum charge

of 235 plus 35 per hour

Operating without a tow the fuel consumption of the Du Pont is

about 7 gallons per hour and it can make the trip from Du Pont to

Blake Island in about 3 hours While towing a barge loaded with

6 F M B
146 FEDERAL MARITIME BOARD

about 200 tons of explosives the fuel consumption would increa

about 9 gallons per hour and the running time from Du Po

Blake Island would be about 5 hours Approximately 14 hours 

running time is required for the Du Pont to tow a barge or ba

from Seattle to Du Pont a loaded barge from Du Pont to B

Island and the return of the empty barges to Seattle The ave

cost per gallon of fuel oil was 14 11 cents in 1953 14 86 cents in 

15 51 cents in 1955 and 16 52 cents in 1956

The plant railroad operated by du Pont employees can carry

a

30 tons of explosives from the magazine to the dock in one 

It can be unloaded from the train and loaded into the Du Po

five men each working a four hour shift The two man train 

would work about nine hours in order to transport 200 tons from 

magazines to the dock Two shifts of five men working eig

eight and one half hours would be needed to unload the 200 tons 

the train and two shifts of six men working the same time wou

required on the barge to receive and store the 200 tons All o

work would be performed by du Pont employees whose av

wage in 1956 was 2 38 per hour A shipment of 400 tons w

require about twice the number of man hours required to move 

load 200 tons The Du Pont can discharge its cargo into an o

going vessel at Blake Island at the rate of about five tons per h

explosi ves from a barge can be discharged at the rate of abo

tons per hour

From the above it is impossible to determine the precise co

du Pont for the movement of any particular shipment from its 

at Du Pont to Blake Island It is clear however that the f

of 10 96 per shipment regardless of size supplied ihy it to P

and Grace understates the direct costs for such movement A

ment of 30 tons after loading at the pier would occupy the 

of the Du P01 Lt for a total of 11 hours at the least including 

hours running time to Blake Island 6 hours for discharge t

ocean vessel and three hours on the return trip Fuel oil costs w

be 5 92 at the lowest price shown in 1953 and crew labor costs w

be 30 assuming that no overtime would be paid for a total of 

without regard to labor costs for loading and unloading On a 

ment of 200 tons and disregarding even crew and other labor 

a minimum of 47 hours would be required to complete the move

including 14 hours running time 8 hours loading time at the 

and 25 hours unloading time at Blake Island which would res

fuel costs of 17 78 and equipment rental costs of 37 for a to

54 78 On a

shipment of400 tons with costs calculated on the 

6 F 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 147

basis allowing only six hours running time for the necessary rented

tug to deliver a

barge from the pier to Blake Island and return to

its base and assuming that the Du Pont and the barges could dis

charge their cargo simultaneously into the ocean vessel the movement

could not be completed in less than 49 hours fuel costs again would

be 17 78 equipment rental costs for three days would be 111 and

tug hire would be 425 for a total of 553 78 Of the 56 shipments

41 weighed between 50 and 300 tons the latter figure being the

maximum capacity of the Du Pont and one rented barge and 5

weighed in excess of300 tons

There is evidence concerning the cost of delivery to vessel at San

Francisco of explosives shippers located in the San Francisco area

competitors of du Pont which are borne in their entirety by such

shippers Such costs range from 5 to 24 30 per ton The evidence

was intended to prove that s ould PFEL and Grace be found to

have allowed clu Pont to obtain transportation at less than the

regular rates or cha rges established and enforced by means of unjust

or unfair means or device in violation of section 16 Second of the

Act such practice likewise would be in violation of sections 16 First

and 17 ofthe Act as unduly and unreasonably prejudicial and prefer

ential and unjustly discriminatory The witnesses for the San Fran

cisco area explosives shippers appearing under subpoena wereunable

to state whether the practices of PFEL and Grace subjected their

respective companies to any disadvantage

The Act provides so far as here pertinent

SECTION 1 The term common carrier by water in foreign commerce means

a common carrier engaged in the transportation by water of passengers

or property between the United States or any of Lts Districts Territories or

possessions and a foreign country whether in the import or export trade

Provided That a cargo boat commonly called an ocean tramp shall not be

deemed such common carr ier by water in foreign commerce

SEC 16 That it shall be unlawful for any shipper or any officer agent

oremployee thereof knowingly and willfully directly or indirectly by means of

false billing false classification false weighing false report of weight or by

any other unjust or unfair device or means to obtain or attempt to obtain

transportation by water for property at less than the rates or charges which

would otherwise be applicable

That it shall be unlawful forany common carrier by water either alone

or in conjunction with any other person directly or indirectly

First To make or give any undue or unreasonable preference or advantage

to any particular person locality or description of traffic in any respect whatso

ever or to subject any particularperson locality or description of traffic to any

undue or unreasonable prejudice or disadvantage in any respect whatsoever

Second To allow any person to obtain transportaJtion for property at less

than the regular rates or charges then established and enforced on the line of

6 F M R

732 047 0 64 11
148 FEDERAL MARITIME BOARD

such carrier by means of false billing false classification false weighing 

report of weight or by any other unjust or unfairdevice or means

SI C 17 That no common carrier by water inforeign commerce shall dem

charge or collect any rate fare or charge which is unjustly discrimina

between shippers or ports

Du Pont contends that PFEL and Grace are not common car

by water in foreign commerce in the transportation of explosives 

tlat the Board has therefore no jurisdiction over such transportat

that its ad itional costs which would be incurred inthe event shipm

ofexplosives weremoved by it from Du Pont to Blake Island exclu

of labor costs which are payable in any event would average ou

10 96 any variations from that figure being de minim

and 

consequently no violation of section 16 ofthe Act has occurred

As to the first contention itis asserted that the person to be reglll

under the Act is the common carrier at common law Agree ment 

7620 2 U S M C 749 752 19 5 that by the restrictive condit

published in the conference tariffs including the reservation o

right to refuseshipments of explosives Grace and PFEL have neg

their common carrier status and that explosives by their nature 

not subject to common carriage citing numerous authorities inclu

Hutchinson On Carriers 3d ed sec 62 where it is stated

To constitute common carriage the carrier must be under such a legal o

tion to carry that an action will lie against him for a refusal to perform 

may carry or notas he deems best he is but a private individual and vested 

other private persons withthe right to make his own contract

The record is clear that Grace and PFEL through the mediu

the conference tariffs hold themselves out to transport explosives 

establish rates applicable to such transportation subject only to 

restrictive conditions as are required by the nature of the cargo 

the restrictive conditions areapplied alike to all shippers ofexplosi

that no special contracts are entered into for such transportation 

that transportation of explosives wasperformed at the tariff rates 

in accordance with the tariff conditions A common carrier is suc

virtue of his occupation not by virtue of the responsibilities u

which he rests LiverpoolSteam 00 v Phenix Ins 00 129 U S 

440 1889

Itis admitted by du Pont that the vessels upon which its shipm

were transported were general cargo common carrier vessels A 

rier may be both a common and a contract carrier but not howeve

one vesselon the same voyage Transp by Mendez 00 I

no Betw

U S and Puerto Rico 2 U S M C 717 721 1944 Gage v Ti

9 Allen 91 Mass 299 1864 See also Waterman v Stockh

Rederiaktiebolag Svea 3 U S 1 C 131 1949 where an adm

6 F M 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 149

common carrier which had refused to carry refrigerated cargo for

anyone washeld to be a common carrier of refrigerated cargo when it

subsequently transported for one shipper under special contracts and

Philip R Oonsolo v Grace Lirw Inc 4 F liB 293 303 1953

The conclusion is inescapable that PFEL and Grace were and are

common carriers of explosives in the light ofthe facts shown here and

as such are subject to the Act Grace Lirw 1M v Federal Maritime

Board 280 F 2d 790 2d Cir 1960

As to the second contention it has been shown that du Pont s costs

for the Blake Island transportation on the du Pont are substantial

not de minimis These substantial costs should have been deducted

by du Pont in preparing the billings submitted to the carriers for reim

bursement To the extent thatthe costs werenot deducted the carriers

reimbursed du Pont for its Blake Island transportation costs

The agreement between the shipper and the carrier as reflected in

the applicable tariff regulation supra is that the carrier would

nbsorb the difference between du Pont s cost of delivery to the San

Francisco loading point and the cost of delivery at Blake Island The

tra sshipment or equalization from point or origin provisions in the

tariff regulation were interpreted by the carriers and the interpreta

tion acceded to by du Pont as shipper to mean that the carriers could

absorb the cost of the inhmd movement less the costs to du Pont of

moving the property from DuPointto Blake Island Du Pont advised

the carriers that this amount was 10 96 although it must have known

by elementary cost accounting principles that not only fuel but other

operating and administrative costs are involved when labor and

equipment are diverted from other plant operations Du Pont always

claimed only fuel costs were involved The tariff regulations apply to

an of du Pont s costs for the Du Pont to Blake Island movement of

property and not just to any added costs or fuel costs Du Pont was

at least disingenuous in telling the carriers its deductible costs were

only iO 96 for the purpose ofbilling the carriers for reimbursement

and in effect required them to subsidize part of its operations The

statute proscribes the obtaining of transportation by a shipper at less

than the rates or charges otherwise applicable Violation does not

depend upon the amount of money involved even assuming that the

theory of du Pont as to the method of computing its cost is correct

The record shows that except for a few shipments du Pont s costs

would have been far in excess ofthe claimed 10 96 and the excess is

not de minimis The facts about these costs were known to du Pont

and were understated to the carriers in requesting refunds pursuant

to the equalization or transshipment agreements Itis concluded that

6 F M B
150 FEDERAL MARITIME BOARD

du Pont knowingly and willfully obtained transportation by 

for the explosives shipments here involved at less than the applic

rates or charges by an unfair orunjust means in violation of se

16 of theAct

The foregoing estimatesand analysis ofthe relationship of duP

Blake Island transportation costs to other plant costs also point 

clusively to the responsibility of the carriers for giving aprefer

to du Pont Not only did du Pont know about the understate

of costs but the carriers did too although they may not have kn

the precise amount The carriers representatives know enough a

business and the allocation of costs to be aware that du Pont s 

for the Blake Island transportation above the 10 96 fuel costs 

being paid for twice once by income from other du Pont reve

and once by the carriers reimbursement Wages repairs ma

nance and replacements administrative overhead taxes insura

and depreciation are such costs The agreement was that du 

would pay these costs This was to be accomplished by the ca

through a deduction from their reimbursement Instead the ca

paid them as a result of the understatement of the deduction an

the consequent overstatement in the billing for reimbursement 

is a fact that no amount ofredun ant reaffirmation by du Pont off

that fuel cost is the only cost and that there were no other costs 

conceal The 10 96 deduction from the reimbursement billing 

never misunderstood by the carriers and was clearly represente

all times to be only extra for fuel costs 7e do not believe we sh

let any claimed ignorance of uch obvious facts be used to a

responsibility for allowing any person to obtain transportation 

property explosives at less than regular rates by the unj ust oru

means of paying the shipper far in excess of the agreed reimbu

ment in violation of section 16 To the extent ofthe excessive r

bursement the carriers also subjected other shippers to unreason

prejudice or disadvantage in violation of section 16 First 

charged a rate that was discriminatory as against other shippe

explosives in violation of section 11

The fact that Grace and PFEL told du Pont about the tariff 

vision made inquiry about the cost of Blake Island transpora

questioned the aUowance and pursued the matter to du Pont s se

officers at its home office in Wilmington and did so more than o

proves if anything the carriers not only suspected what was g

on but deliberately or through calculated ignorance allowed th

selves to be side tracked in the search for a cost figure instea

pointing out to du Pont the true meaning ofthe reimbursement ag

6 F M 
ABSORPTION OR EQUALIZATION ON EXPLOSIVES 151

ment and the true result of the payments they were making This

they never did As a result the carriers actually allowed transpor

tation at less than regular rates and actually allowed du Pont to

obtain a discriminatory rate This cannot be treated as a case of

inadvertence The carriers failure to object to the obvious double

payment of Blake Island traI sportation costs and to the excessive

reimbursement in violation of the tariff regulation involves such a

disregard of the facts of business life as to amount to an intent and

a know ng scheme to violate sections 16 and 17 and we so hold This

case is clearly distinguishable in this regard from Practices of Fabre

Line and Gulf Mediterranean Oonference 4 F MB 611 1955

We further Jelieve that the carriers contrary to their claim of

helplessness had ample means of enforcing the tariff other than by

refusing to transport They could have simply refused to pay on

du Pont s billings for reimbursement or abated the reimbursement

to du Pont by their estimate of du Pont s Blake Island costs thus

compelling duPont to produce its known costs

We conclude that du Pont by means offalse billing has know

ingly obtained or attellpted to obtain transportation by water for

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

applicable and 2 that PFEL and Grace allowed du Pont to obtain

transportation by water for property at less than the regular rates

or charges then established on their lines by means of an unjust or

unfair device or means

This matter will be referred to the Department of Justice for

appropriatec action

6 F M H
152 FEDERAL MARITIME BOARD

ORDER

At a Session of the FEDERAL MARITIME BOARD held at 

office in Washington D C on the 5th day of December A D 196

No 819

ABSORPTION OR EQUALIZATION OF INLAND FREIGHT CHARGES IN

CONNECTION WITH TRANSPORTATION BY WATER OF EXPLOSIVES

Grace Line Inc having filed a petition for reopening thisproceed

for the purpose of reargument and reconsifiieration and it appe

ring

that the petition does not present any issues not considered in 

report ofthe Board entered September 16 1960

Itis ordered That the said petition be and itis hereby denied 

It is further ordered That this proceeding be and it is here 

discontinued

By the Board

Sgd THOMAS LISI

SeC1etary

6 F M 
DEPARTMENTOF COMMERCE

MARITIME ADMINISTRATION

No 8 117

PACIFIC FAR EAST LINE INC APPLICATION UNDER SECTION 805 a

Submitted October 18 1960 Decided Ootober 18 1960

Pacific Far East Line Inc granted permission under section 805 a of the

Merchant Marine Act 1936 as amended to use tQe SS India Bear on October

14 1960 to lift and transport approximately 650 measurement tons of

military cargo on one voyage from San Diego California to Honolulu

Hawaii at the request of Military Sea Transport Service since the granting

of such permission would not 1 result inunfair competition to any person

firm or corporation operating exclusively in the coastwise or intercoastal

trade or 2 be prejudicial to the objects and policy of the Act

Odell KO1niners for applicant

Willis R De1ning for Matson Navigation Company intervener

John R Oograve as Public Counsel

REPORT OF THE DEPUTY MARITIME ADMINISTRATOR

By THE DEPUTY MARITIME ADMINISTRATOR

Pacific Far East Line Inc PFEL by letter of October 7 1960

informed the Maritime Administration that it had been asked by

Military Sea Transportation Service MSTS to lift approximately

650 measurement tons of military cargo from San Diego California

to Honolulu Hawaii aboard the S8 India Bear The letter was

treated as an application for written permission under section 805 a

of the Merchant Marine Act 1936 46 U S C 1223 and notice was

published in the Federal Register of October 12 1960 25 F R 9773

that a hearing on the application would be held The only intervener

was Matson Navigation Company Matson

PFEL proposes to use the India Bear on one westbound voyage

after completing loading operations in Long Beach California

6 M A 153
154 MARrTIME ADMINISTRATION

October 13 1960 The vessel can proceed to San Diego on Octobe

1960 without interfering with its presently scheduled departure f

San Francisco California onOctober 20 1960 Itwill call at Ho

lulu on its normal schedule The proposed transportation was 

gotiated only after the failure ofefforts to have the cargo transpo

by other lines and on Matson s vessels Alternative offers by Ma

for loadings on October 15 and 16 were rejected by MSTS w

attributed military importance to a loading on October 14 Ma

is the only other American flag operator in this service betw

California and Hawaii which has shown theMaritime Administra

that it has any interest in the competitive effect ofthe proposed tra

portation Matson s witness stated that it does not object to PF

lifting this one westbound cargo on October 14 Public Counsel 

sented no evidence on thecoJIlpetitive eff ct of the proposed shipm

Itis found that the granting of the permission applied for wil

result in unfair competition to any person firm or corporation 

erating exclusively in the coastwise or intercoastal trade or be p

udicial to the objects and policy ofthe Act

This report shall serve as written permission for the voyage

6 M 
FEDERAL MARITIME BOARD

No 802

MISCLASSIFICATlON AND MISBlLLING OF GLASS TUMBLERS AND OTHER

l1ANUFACTURED GLASSWARE ITEMS AS JARB

Submitted August 16 1960 Decided November 21 1960

BartlettCollins Company and Houston Freight Forwarding Company found to

have knowingly and willfully misclassified shipments of glass tumblers and

other glassware items obtaining transportation by water therefor at rates

less than otherwise would have been applicable in violation of section 16

of the Shipping Act 1916 as amended The matter will be referred to the

Department of Justice for appropriate action

Lykes Bros Steamship Co Inc Royal Netherlands Steamship Company and

Compania Anonima Venezolana de Navegacion Venezuelan Line found to

have allowed persons to obtain transportation for property at less than the

regular rates by means of false classification in violation of section 16

Second of the Shipping Act 1916 The matter will be referred to the

Department of Justice for appropriate action

Karl H Mueller and Harold E Mueller for Bartlett Collins

Company

Riohard H Powell and lVarren H Powell for Houston Freight

Forwarding Company

M L Oook for Lykes Bros Steamship Co Inc and Royal Nether

lands Steamship Company

NormanM Barron for Royal Netherlands Steamship Company

David Orlin for United States Atlantic Gulf Venezuelan

Netherlands Antilles Conference

Robert o Bamford and John E Oograve as Public Counsel

REPORT OF THE BOARD

RALPH E WILSON Ohairman THOS E STAKEM Jr Vice Ohai1 1lWn

SIGFRID B UNANDER Member

By THE BOARD

The Board as authorized by section 22 of the Shipping Act 1916

the Act initiated an investigation to determine 1 whether Bart

6 F M B 155
156 FEDERAL MARITIME BOARD

lett Collins Company Bartlett or shipper a manufacturer a

shipper ofglass products and IIouston Freight Forwarding Compa

Houston or the forwarder a freight forwarder had willfu

directly or indirectly by means of false classification or by any ot

unjust or unfair device or means obtained or attempted to obt

transportation by water for property at less than the rates or char

which otherwise would be applicable during September 1955 

thereafter and 2 whetherLykes Bros Steamship Co Inc Lyke

Royal Netherlands Steamship Company Netherlands and C

pania Anonima Venezolana de N avegacion Venezuelan Line c

mon carriers by water the carriers allowed any person to ob

transportation for property at less than the regular rates or char

then established and enforced on the line of such carriers by means 

false billing false classification or by other unjust device or mea

in violation of section 16 of the Act The alleged violations ce

around certain false classification of glassware shipped from Sapu

Oklahoma to ports in Venezuela as described in bills of lad

covering shipments between September 1955 and June 1956

The examiner recommended that Bartlett and Houston be foun

have violated section 16 but that the carriers be found not to h

violated the Act For the reasons hereinafter noted we find tha

of the respondents violated section 16

FACTS

1 The forwarder classified Bartlett s shipments of glass tumb

or drinking glasses nappy a round serving dish jugs pitche

stemware cookie jars sherbet glasses ash trays beverage sets ta

ware decanter sets cola tumblers bowl sets reamers juice ext

tors flower bowIs and other table glassware and caster cups 

empty glass jars or glassware jugs on 44 bills of lading of 

carriers dated between October 7 1955 and March 19 1956 

descriptions appeared under the headings Shipper s Description 

Goods and Class and Contents of Packages The forwarder 

pared and rated entered the freight rates and computed the fre

charge the bills of lading in complete form except for signat

numbering and dating before they were issued by the carriers

2 Before preparing the bills of lading the president owner ac

manager of the forwarder discussed the classification of the glassw

with Bartlett s authorized representatives and wasinstructed by t

to classify the shipments as jars Both the shipp Pl pud the forwa
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 157

knew the shape size and appearance of the articles The shipper

correctly classified the glassware on a its loading tally based on its

catalogue descriptions and numbers and b its inland bills of lading

based on the tally and the forwarder correctly classified the glass

ware on an export declaration which it also prepared The jars

classification was used only on the carriers bills of lading The classi

fication on this documentcontrols the amounts charged for transporta

tion by the carriers The shipper s catalogue describes the articles as

listed above They are not referred to therein as j

aIS There was

evidence that the tumblers could be used as jars if suitable caps were

used Caps were not furnished and there is no evidence that they

were so used by the consignees named in the bills of lading of record

3 The commodity descriptions and classifications in Freight Tariff

No 6 of United States Atlantic and Gulf Venezuela and Netherlands

Antilles Conference in effect September 1955 and carried forward

into Tariff No 7 effective from December 14 1955 through the date

of the lastbill of lading distinguish between Bottles or Jars Empty

Glass with or without caps Item 115 and glassware and

tumblers Item 1000 The former are transported at substantially

lesser rates than otherwise would be applicable to correctly classified

glassware e g

18 66 as against 9240 on one shipment

4 There is no evidence that any of the items shipped were shown

to officials of the carriers in order to obtain a decision as to the proper

tariffrating Employees of the forwarder made only verbal inquiries

to the carriers employees as to the rate on jars or tumblers The

carriers did not have and were not informed what the inland bills of

lading or the tally sheets showed but they did have the export declara

tions The variances between the bill of lading descriptions and

export declaration descriptions of the same property was not noticed

because the declaration does not always accompany the bill of lading

and they were not always brought together and compared The car

riers relied on the shipper s description of the property in validating

bills of lading and in allowing the shipper to obtain transportation

for the property at the established tariff rate Tariff No 7 Item 115

5 Eighteen ofthe 44 shipments were carried on Lykes vessels 12

on Royal Netherlands vessels and 14 onVenezuelan Line vessels from

Houston or Galveston Texas to La Guaira Maracaibo or Puerto

Cabello Venezuela

The investigation disclosed that the 44 bills of lading in evidence

were merely illustrative of a great number at least 240 of various

documents examined

6 F MB
158 FEDERAL M RITIME BOARD

DISCUSSION

1 Oharges against the shipper and the f01 1oarder

Bartlett shipped at least 1977 cartons of glassware consistin

water pitchers beverage sets ash trays vases bowl sets salt 

pepper shakers dessert dishes fruit bowls cookie jars sherbet dis

small one ounce glasses with handles sugar bowls cream pitch

juice reamers plates ftower bowls coasters and caster cups 

appendix for a breakdown of articles by cartons which it descr

on ocean bills oflading as glass jars orjugs when the tariff class

tions available also provided a rate for glassware The descrip

of these articles as empty jars or jugs instead of glassware w

factual misclassification Regardless of any dual use of drin

glasses as food containers or for powdered soap or bubble 

granules as shown in exhibits and as jars as contended by resp

ents there could be no such ambiguity about the contents of the 

cartons Bartlett also shipped over 7700 cartons of drinking gla

which it contends arecorrectly elassifiable as jars instead of tumb

The controlling use of all the glassware except the caster c

including the tumblers however was table glassware This is cle

shown both by the pictures and other information in the Ba

catalogue and by the fact that retailers of g

assware such as de

ment stores drug stores and 5 and 10 cent stores were among B

lett s customers Bartlett introduced some evidence of the dom

sale of its products for packaging but none of the Venezuelan 

signees of the shipments examined were identified as packers

Bartlett relied mainly on argumentative proof that the adapta

of the tumblers for use as jars or as packers tumblers could be 

to control the tariff classification It and the forwarder argue 

the matter should be put the other way around and that we shoul

the articles are jars such as jelly glasses or jars which are treat

containers not as tumblers notwithstanding the fact that they 

susceptible to use as tumblers

Ve think the starting point should be the manufacturer s catalo

sales efforts and common understanding as to what the manufact

shipper had for sale Such common understanding is reached 

study of the essential characteristics of articles

There is also a constant refrain in the testimony of the forwar

president that we are not glass experts However this excu

not applicable to the forwarder s ability to identify table glasswa

tumblers for drinking purposes by using as a

starting point for 

thinking the commonly accepted meaning of these terms It is 

when one reverses the approach by departing from the com

F M B
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 159

understanding and tries to conyert table glass vare and tumblers into

packaging containers that expertise becomes a factor One has to

know whether they are suitable for ca pping for use with machinery

which puts food into them or for standing up under the handling

involyed in packaging transporting and merchandising If the

forwarder and his employees had not looked through the wrong end

ofthe telescope to describe the articles in the bill of lading they would

not need to be an expert and would haye been able to find the correct

tariff description with no trouble

Possible use does not change the essential character of the articles

and is not a lawful basis for a difference in freight charges Int

Oom 00m1n Y Balt Ohio R R 225 U S 326 1912 Orancer V

Lowden 121 F 2d 645 8th Cir 1941 imball v Ohicago RI P

Ry 00 271 F 469 8th Cir 1921 Sto e Fuller Oompany V Penn

sylvania 00 et al 12 IC C 215 1907 Ex River Ooal from Mt

Vernon Ind to Ohicago 294 IC C 233 1955 This is particularly

true in the present case where the tumblers were not shown to haye

been sold for packaging but were sold as table glassware

The drinking glasses shipped by Bartlett notwithstanding any

adaptability as containers when capped would be described more

correctly by common usage as tumblers rather than jars They

are labeled Tumblers in Bartlett s own catalogue They are so

designated in other documents The identical Tumbler designation

wasan available classification in the tariff Itshould have been used

The controlling use as a

drinking glass determines the correctness of

the tumbler classification Oontinental Oan 001npany V United

States 272 F 2d 312 2d Cir 1959 and cases cited The jars classi

fication used to describe tumblers likewise was factually incorrect

1Ye haye recently so held in llazel Atlas Glass Oo llfisclassification

of Glass Tumblers 5 F M B 515 1958 and Jfarkt Hammacher

Oo J

lisclassification of Glasswa1e 5 F M B 509 1958 Ve hold

that the drinking glasses or tumblers also were falsely elassified as

Jars

The fase classification results in the billing and payment of a lower

freight rate than would be applicable to tumblers and glassware To

the extent the billing depends on the classification for its correctness

it too was false Section 16 is violated by shippers and forwarders

if the false classification and the false billing were knowingly and

willfully made

Wilfully means purposely or obstinately and is designed to de

scribe the attitude of a carrier who haying a free will or choice

1 Reversed by ConUnental Can 8upra on the ground that the Board tailed to adduce

proof that the controlling use was a

drinking glass ortumbler

6 F M B
160 FEDERAL MARITIME BOARD

either intentionally disregards the statute or is plainly indiffere

its requirements U S v Illinois Oent R 00 303 US 239 1

In Rates from Japan to United States 2 U S MC 426 434 1

the Maritime Commission stated Their persistent failure to in

oreven attempt to inform themselves through the means w

normal business resource and acumen should dictate is proof tha

knowingly and willfully keep themselves in ignorance of the 

billings concerned A Federal court has said with reference t

Elkins Act 49 US C 41 3 which penalizes anyone who 

knowingly receive a rebate it wasnot necessary u

the Elkins Act that there should be an intentional violation o

law but that purposely doing a thing prohibited by the s

amounted to an offense United States v Erie R 00 222 Fed 

449 D N J 1915

In addition to what has beEm noted in the facts and as relat

these standards the examiner found as follows with regard to 

willfulness or knowledge the respondents may have had as to 

wasgoing on

1 Bartlett described the same glassware on a

loading t

which it prepared as tumblers vase assortment Ste 

Nappy etc as noted inthe appendix

2 Bartlett described the same glassware in inland bills of la

which it prepared in connection with truck shipments to IIo

orGalveston as glass tumblers or glassware such as glass 

ing sets or decanter sets ash trays or handle mugs 

required These bills of lading distinguish between the cartons 

taining tumblers and those containing other glassware This 

that Bartlett was aware of the distinct characteristics of its pro

3 Bartlett knew the shape size and other characteristics 

products and that they were used predominantly as tablewa

is also shown by its catalogue descriptions and its sales inform

which it issued to the public

4 In spite of its knowledge of the dominant characterist

its product Bartlett s

representatives instructed Houston to cl

the shipments as jars These actions followed discussions be

the owner president and active manager of Houston who te

he talked to one of the Bartletts possibly Edward Bartlett 

pointed out to the Bartlett Collins Co the way the tariff read

5 Houston in 23 of the 44 shipments in evide ce describe

cargo as glass tumblers in the export declaration which it prep

Itclassified the shipments pursuant to a schedule covering Tum

Drinking Glasses and Stemware Machine Made The export 

rations contained a statement by Bartlett as the shipper signed 

6 F 
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 161

duly authorized officer or employee authorizing Houston to act

as forwarding agent for export control and customs purposes

6 Houston in 20 of the 23 foregoing shipments on the ocean

bills oflading whieh it prepared described the same cargo as Empty

Glass Jars under 1

gallon capacity and thus brought the shipment

under the tariff classification covering Bottles or Jars In the

majority of the cases Houston also had in its possession the Bartlett

tally sheet or inland bill of lading containing the correct descriptions

noted above IfHouston simply had follo ved the documents in its

possession and not consulted with the shipper it would have described

the contents ofthe cartons correctly The variances in the ocean bills

of lading were made only afte1 consultations with the shipper The

foregoing was written on a bill of lading form Lykes form which

contained the following notation at the bottom of the page Atten

tion of shippers consignors consignees forwarders brokers and other

persons is called to the provisions of Sec 16 of the Shipping Act

1916 as amended by the Act approved June 16 1936 in relation to

penalty of not more than 5 000 in relation to false billing false

classification false weighing false report of weight or any other

unjust or unfair device or means or attempt to obtain transportation

by water of property at less than the rates or charges which would

otherwise be applicable

The above findings show not only that both Bartlett s and Jlouston s

senior officers knew there was a variance between what was being

shipped and what was described in documents containing this warn

ing and issued over the signatures of their employees but also that

the variances were willfully created Vith full information about

the articles they studied the tariff and then made up their minds

about what to do They decided to choose a classification giving the

lowest rate They eould ship a

jar for 514 times less th1n it ould

cost to ship a tumbler They had a choice in classifying the articll3s

They exercised their choice by choosing the improper description con

sistently and continually The choice involved willfully ignoring a

printed warning as well as a more descriptive classification of the

articles shipped with a full knowledge a of the characteristics and

normal use of the article and b ofthe proper classification thereof

As a result they obtained transportation at less than the rate and

charge otherwise applicable

2 Oharges against the Car1 ie1 s

Section 16 is violated by common ca rriers by water if they allow

any person to obtain transportation for property at less than the

regular rates or charges then established and enforced on the line

6 F M B
162 FEDERAL MARITIME BOARD

of such carriers by means of false billing or false classification

The status of Lykes Venezuelan Line and Royal Netherland

common carriers by water and the fact that the tariff used by Bar

and Houston contains the rates and charges then established 

enforced by the carriers and its applicability to the shipments 

question were properly established by testimony and are not den

The falsity of the classfication and of the use of less than

regular r

orcharges inbilling have been shown above

To allow a person to do something means to approve or to s

tion an act or to suffer something to be done by neglecting to rest

or prevent Webster s New Collegiate Dictionary In Prac

of Fabre Line and Gulf Afediterranean Oonf 4 F M B 611 

1955 itwasstated

Although unlike the first paragraph of section 16 the quoted language 

not contain the words knowingly and willfully or similar words inten

nevertheless an element essential to establishment of violation of sectio

Second which makes unlawful allowing by unjust or U

ntair device 01 me

any person to obtain transportation at less than the regularly established 

enforced rates or charges No resort to lexicography is necessary to deter

that a device must be a willful knowing scheme or means to an end

It is apparent then that a carrier does not violate section 16 Secon

inadvertence unless the evidence reveals such a wanton disregard of the 

to exercise reasonable diligence to collect avplicable rates and charges 

transportation as to amount to an intent to collect less than the applic

rates and charges

In Rates fr01n United States to Philippine Islands 2 U S M C 

1941 the JfaritimeCommission held that carriers office procedu

which consisted of comparing bill of lading descriptions with ex

declaration descriptions followed up by having someone in the 

of lading department notify the shipper by telephone in case 

discrepancy was insufficient and that this procedure against a b

ground of actual knowledge by the carriers of widespread flag

false billing by shippers constituted a violation of section 1 

Rat 8from Japan to United States 8Up1 a the Jfaritime Commis

held that carriers purposely keeping themselves in ignorance of f

billing by shippers in order to deny actual knowledge were estop

to deny that which could be learned by the exercise of reason

diligence Itwas concluded that the carriers had violated section 

With reference to the foregoing standards we find the follow

1 In at least 16 shipments by Lykes the ocean bills of lading 

scribed cartons as containing empty glass jars glassware ja

or glass j

ars and the export declaration described them vario

as glass tumblers glassware tumblers drinking glasses 

stemware table glassware or beverage sets tumblers

6 F M 
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 163

2 At least 11 shipments by Venezuelan Line were described the

same way in the ocean bills of lading and five export declarations

described the property as table glassware or glass tumblers The

remaining six export declarations described the property as other

unfilled glass containers new jars and jugs

3 At least 13 shipments by Royal Neth rlands were described the

same way in the ocean bills of lading and five export declarations

described the shipments variously as cookie jars glass tumblers

table glassware drinking glasses and stemware glassware or

nappies The remaining eight export declarations described the

property as other unfilled glass containers Jars new new jars

and jugs or new jars as variations of the words Jars new

4 According to its witness Lykes has a standard operating pro

cedure which requires that the descriptions on the bill of lading be

compared with the export declaration and in case of discrepancy the

reviewing employee is supposed to report to his supervisor if the

differ nce in the description has any significance Under cross exam

ination however the witness indicated that it was very unlikely that

this standard operating procedure was actually followed in the

daily operation of a busy steamship office where the clerk responsible

is scampering from pillar to post getting all these different things

together while Consulates are sitting on his neck This was

described as pretty representative activity He also said

now if it s followed all the time Iwould hate to say because you

have to depend on clerical help to do it The witness also stated that

in case of doubt abouta classification Imust guide myself by the

shipper who after all knows what he is shipping and tells me He

professed lack of qualification to tell a jar from a tumbler He de

clared it is not within the province of any steamship agent to

question the veracity of a

shipper unless he has good solid cause and

in that case Istill think he should go to the shipper first

5 VenezuelanLine s witness stated that it is our practice to attempt

to check each a nd every bill of lading and dek sic export declara

tion against one and the other In case of discrepancies we will

ask the freight forwarder or shipper to either correct one or

the other whichever is the correct description

6 Royal Netherlands through its line manager employed by

Strachan Shipping Co as local agent testified that my general in

structions and my understanding is that we compare the export decla

ration description with the bill of lading description when we are in

doubt as to whether it is properly described in the bill of lading or

whether by referring to the export declaration we might get a better

idea of the proper rate to apply to the item that is on the bill or

6 F M B

732 047 0 64 12
164 FEDERAL MARITIME BOARD

lading Under further questioning about comparison procedure 

said the company made spot checks where sufficient comparison se

in the opinion of the person handling it justified or called for

7 The export declaration is a customs document which requir

description ofthe contents ofexport shipments The standard clas

cations it calls for are contained in a Government publication 

evidelice containing lists of all of the expol ted commodities of 

United States by category and number Its descriptions do not ne

sarily conform to those in tariffs and it is entirely possible to che

declaration against a bill of lading and not find an inconsistency w

in fact there is a false classification Nevertheless the declaratio

a useful guide to variances in descriptions of property which 

aIert anyone comparing them with bi tls of lading and lead to the 

covery of a misclassification It seemsto beahout the only way s

of opening and visually inspecting packages to find out a

discrepancies

8 In June 1956 at Galveston the cargo consisting of carton

glassware on the SS Fred Morris operated by Lykes was inspe

by an inspec tor employed by the United States Customs He h

shipper s export declaration with him The inspection consiste

opening several cartons taking out several pieces of the glassw

contents looking at them placing them back in the cartons and 

resea 1ing the cartons The inspector prepared a written report d

July 18 1956 showing from the export declaration that Bar

was the exporter and that the contents of various numbers of ca

were table glassware glass serving sets or tumblers The 

ness called them ordinary drinking glasses The purpose o

inspection was to assure conformity between the contents of 

caTtons andthe descriptions in theshipper s export declaration T

is no evidence that any employee of Lykes was present saw an

these actions or the articles removed or received a

copy of the ins

t

ors

report No inspections were made by employees of the o

two lines

The question is whether these facts show that the carriers did 

restrain the shipments after examining the two sets of documents o

having the opportunity to do so as the result of a wanton disre

of the duty to collect applicable rates The carriers office proced

permitted a discovery of questionahle variances but they are 

coupled with additional evidence of knowledge about false bi

practices generally The problem is to determine whetherthe car

were sufficiently alerted to the significance of the variances in cla

cations even without such knowledge to justify a finding that 

6 F M 
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 165

purposely kept themselves in ignorance by not inspecting the cargo

and checking documents more diligently and thus allowed the shipper

to obtain transportation at less than established rates

The testimony is meager and confusing about what actually hap

pened with reference to the particular shipments As to Stracllan

Shipping Co and Royal Netherlands there is no evidence that the

spot checks or documents they customarily made were evermade with

regard to these shipments Lykes presented a picture of complete

disorganization But two factors emerge both in the testimony of

carriers witnesses and in the argument of counsel First they had

available in their offices and to some extent the extent is not clear

compared export declarations and bills of lading to determine

whether the bills of lading and the billings were false but in this

case such use failed completely to bring about any discovery which

could lead to action to correct the false classifications that have been

shown to exist Lykes counsel stated that in any event the differ

ences were certainly not of a nature as to put a

nonexpert bill of

lading clerk on notice of a misclassification Second in case of

doubt the carriers in the words of their counsel must rely upon

the classification of the goods as furnished by the shipper directly

or through his freight forwarder The Lykes witness testified

according to counsel s brief more than once that he could do

nothing other than rely on the shipper s description and claimed

lack of ability to tell j

aIS from tumblers and table glassware if he

had one of the objects in question before him To the extent ofany

doubts raised by comparisons the carriers employees went to the

shipper for information instead of looking at the shipment to satisfy

themselves Third in case of doubt there was never any effort to

inspect cargo nor any admission of responsibility to do so

The entire picture in the words of the carriers counsel and wit

nesses is one of abnegation of any responsibility for making a serious

effort to determine the truth The position they argue puts a

pre

mium on ignorance failure to act and slovenly office procedures It

encourages the management to hide behind the actions of subordinates

as an excuse for mistakes The carriers own excuses show a wanton

disregard of any kind of duty to exercise reason ble diligence in

enforcing procedures which would minimize deceits and falsification

of documents If the carriers arguments were accepted section 16

Second would become unenforceable except in the flagrant situations

disclosed in the Japan and Philippine cases dupra The carriers

would simply immunize themselves from any obligations under sec

6 F MB
166 FEDERAL MARITIME BOARD

tion 16 by inaction ineffective internal procedures and inex

personnel The carriers intent to avoid their duty is inferred f

their refusal to rely on their own processes of discovery and on t

own personnel and from their placing complete reliance on ship

or forwarders who have an incentive to conceal This constitut

willful and knowing means to avoid discovery of the truth w

is an unjust and unfair means

There variances in documents were shown the carriers negle

to restrain or prevent the misclassification simply by taking 

shipper s or the forwarder s word as the result of verbal discuss

or consultations and letting it go at that They allowed the un

means qf falsifieation of documents to be used and go uncorre

when they did not open packages themselves or ask for the art

to be visually inspected after being alerted by such verbal cons

tions tVe do not think it is always essential that a background 

widespread flagrant false billing be shown as an essential ingred

in the offense under section 16 Other evidence is equally mate

The faet that there is no specific law or regulation compelling c

parison of documents is also not essential or material tVe are 

making the earriers liable for the violation of such a nonexistent 

or regulation but aTe interpreting section 16 to determine if by 

action or inaction diselosed the carriers allowed illegal transporta

within our definition of the yord allow In this case the act

of haphazard document comparisons and of total reliance on 

shippers who are the very persons seeking the transportation 

property at less than the carriers regular rates constitutes su

wanton disrega rd of duty as to allow the shipper to obtain the tra

portation on his terms Prince Line v Arnerwan Paper Expo rts 

F 2d 1053 2d Cir 1932 As a result of a ineffective office 

cedures b total reliance on shippers for discovery of the truth 

c failure to inspect cargo when alerted we find the carriers h

allowed Bartlett to obtain transportation of glassware at less than 

applicable rates established and enforced by them

3 Other issues

Bartlett sought by petition to reopen the record for further 

dence after the examiner s recommended decision had been m

The further evidence consisted of a tariff changes on June 11 

after reconvening the hearing before the Examiner changing 

rates applicable to tumblers and b of still further changes s

the elosing of the hearing in March 1960 The subject of the inv

6 F M 
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 167

gation however is what respondents did between September 1955

and June 1956 Since the petition does not relate to anything done

or existing in this period and relates to happenings long afterwards

it seeks to include evidence necessarily irrelevant to the issues The

petition is denied

The matter will be referred to the Department of Justice

6 F M B
168 FEDERAL MARITIME BOARD

APPENDIX

The following is a

listing of the number of cartons of glassw

which was shipped showing as to each item the catalogue num

and identification title in the catalogue a description of the ar

from photographs in the shipper s catalogue and how it was liste

ocean bills of lading

1 14 ctns 1680 80 oz Jug an ice lip water pitcher with handle liste

glassware jars or as empty glass jars

2 10 ctns 19800 oz Jug same as 1 above

3 530 ctns 11800 oz Jug same as 1 above

4 1 ctn 16807 pc beverage Set aD ice lip water pitcher with 6 tumble

listed as glass jars

5 27 ctnS 104 and 107 ash trays listed as empty glass jugs or glass j

or glassware tumblers

6 77 ctns 1300Vase a 3 high flower vase listed as glass jars em

7 2 ctns 5678 4pc Bowl Set 4 different sized kitchen mixing bowls w

fitone inside the other listed as empty glass jars

8 137 ctns 113636 oz Jug an ice lip water pitcher witha handle 

as glass jars

9 112 ctns 1700 and 1800 S P Salt and Pepper Shakers regular 3

and King Size 4 listed as empty glass jars

10 42 ctns Ste Gen Nappy imitation cut glass decorations on desse

fruit compote dishes listed as glassware jars 4Y2 and fruit b

8112

11 134 ctns 1590cookie jar a 1 gallon cookie jar with a glass top 

high listed as glass jars

12 18 ctns 400 and 500 Sherbet a dessert dish 2 high liste

glassware jars or empty glass jars

13 65 ctns 201 1 oz tumblers a glass with beer mug shape and a ha

2 high listed as glassware tumblers

14 75 ctns 2400vase assortment flower vases listed as glassware 

blers or empty glass jars or glass jars

15 120 ctns 11801111 7 pc sets an ice lip pitcher with a handle 8

capacity together with six 11 oz tumblers 4 high listed as e

glass jars

16 67 ctns 19801911 7 pc sets an ice lip pitcher with a handle 8

capacity together with 6 tumblers listed as empty glass jars

17 11 ctns 1600 Sugar and Cream a sugar bowl with 2 handles 

a cream pitcher with handle and lip each 3 high listed as e

glass jars

18 10 ctnS No 2 Reamer a fruit juice squeezer listed as glass jars

19 580 ctns 3200Flower Bowl listed as glass jars

6 F M 
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 169

20 20 ctns Ste Gen 11 inch Plate a fiat plate imitation cut glass listed

as glass jars

21 40 ctns Ste Gen Cream or Sugar handled cream pitcher and sugar bowl

with imitation cut glass design listed as glass jars

22 1 ctn 2Ocoaster an iced tea or other beverage glass coaster listed

as glassware tumblers

23 8 ctns Caster cups glass cups placed under casters or furniture legs to

protect fioors listed as glassware tumblers

NOTE The shipper s catalogue in evidence is titled Crystal Glassware

Pressed Blown Table Glassware Hotel and Bar Glassware Kitchen Glassware

Lamp Founts

6 F M B
170 FEDERAL MARITIME BOARD

ORDER

At a Session of the FEDERAL MARITlME BOARD held a

office in Washington D C on the 21st day of November A D 

No 802

MISCLASSIFICATION AND MISBILLING OF GLASS TUMBLERS AND OT

MANUFACTURED GLASSWARE ITEMS AS JARS

This proceeding having been initiated by the Board upon its 

motion and having been duly heard and submitted and investiga

ofthe matters and things involved having been had and the Board 

the date hereof having made and entered of record a

report contai

its conclusions and decision thereon which report is hereby refe

to and made a part hereof

It is ordered That

1 The following respondents be and each one is hereby not

and required a to hereafter abstain from the practices herein fo

to be unlawful under section 16 ofthe Shipping Act 1916 as amen

and b to notify the Board within ten 10 days from the dat

service hereof whether each such respondent has complied with 

order and if so the manner in which compliance has been m

pursuant to Rule 1 c ofthe Board s Rules of Practice and Proced

46 CFR Part 201 3

I

Ioustol Freight Forwarding Company

Lykes Bros Steamship Company

Royal Netherlands Steamship Company

Compania Anonima Venezolana

2 The proceeding be and it is hereby discontinued

By the Board

Sgd THOMAS LISI

Secretar

6 F M 
MISCLASSIFICATION AND MISBILLING OF GLASS ARTICLES 171

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Vashington D C on the 21st day of November AD 1960

No 802

MISCLASSIFICATION AND MISBILLING OF GLASS TUMBLERS AND OTHER

MANUFACTURED GLASSWARE ITEMS AS JARS

This proceeding having been initiated by the Board upon its own

motion and having been duly heard and submitted and investigation

of the matters and things involved having been had and the Board on

November 21 1960 having made and entered of record a

report

containing its conclusions and decision thereon which report is hereby

referred to and made a

part hereof

It is ordered That

Respondent Bartlett Collins Company be and is hereby notified

and required a to hereafter abstain from the practices herein found

to be unlawful under section 16 ofthe Shipping Act 1916 as amended

and b to notify the Board within ten 10 days from the date of

service hereof whether respondent has complied with this order and

if so the manner in which compliance has been made pursuant to

Rule 1 c of the Board s Rules of Practice and Procedure 46 CFR

Part 201 3

By the Board

Sgd THOMAS LISI

Secretary

6 F M B
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

8 118

AMERICAN EXPORT LINES INC ApPLICATION UNDER SECTION 

Submitted December 2 1960 Decided December 2 1960

The continuation by Isbrandtsen Company Inc of its service from C

to Norfolk Virginia and Baltimore Maryland from California t

Rico and from Puerto Rico to Norfolk all in conjunction with its e

round the world service found not to constitute unfair competitio

person firm or corppration engaged exclusively in the coastwise 

coastal service nor to be prejudicial to the objects and policy of 

chant Marine Act 1936 as amended notwithstanding applicant s as

withAmerican Export Lines Inc

Frank B Stone and J S Simpson for applicant

Richard W Kurrus for Isbrandtsen Company Inc

John Rigby for the Commonwealth of Puerto Rico

EdwardAptaker and Donald J Brunner as Public Counse

REPORT OF TiIE DEPUTY MARITIME ADMINISTRATOR

By THE DEPUTY MARITIME ADMINISTRATOR

American Export Lines Inc American Export filed an 

tion for written permission under secyon 805 a of the lle

larine Act 1936 as amended 46 U S C 1223 the Act 

continuation of certain domestic intercoastal or coastwise ser

Isbrandtsen Company Inc Isbrandtsen American Exp

contractor under authority of title VI of the Act Contr

FMB 87 Isbrahdtsen is conceded to be an associate of t

tractor by virtue ofhaving acquired 316 440 shares of its stock 

ferIed in October 1960 American Export has 1 200 000 sh

stock outstanding and Isbrandtsen is the holder of approx

264

percent of the total No one intervened in the proceeding

172 
AMERICANEXPORT LINES INC SEC 805 a APPLICATION 173

The Fede 1 Maritime Board already has givenIsbrandtsen written

permission for the continuation of service from California to Norfolk

Virginia and Baltimore Maryland from California to Puerto Rico

and from Puerto Rico to Norfolk all in conjunction with its eastbound

round the world service The permissions are contained in the

following reports and orders of the Board 18brandtsen 00 lnc

Subsidy KIB Round the World 5 F MB 448 1958 5 F MB 483

1958 and order in same proceeding dated November 23 1960

Pertinent portions ofthese reports and orders are hereby incorporated

into the present report

It is found that granting the required permission to American

Export will not result in unfair competition to any person firm or

corporation operating exclusively in the coastwise or intercoastal

service or be prejudicial to the objects and policy of the Act

6 M A
FEDERAL MARITIME BOARD 

DoCKET No 8 73 SUB No 2

WATERMAN STEAMSHIP CORPORATION ApPLICATION UNDER S

I

804

Submitted September 15 1960 Decided December 7 1960

Special circumstances and goo i

cause shown under section 8 Me

Marine Act 1936 as amended 1 to permit Waterman Steamship C

tion of Puerto Rico to act as agent for Hamburg Amerika Linie a 

German operator of foreign flag vessels competing with essential Am

flag service and 2 to permitWatennan Lines Antwerp S A and 

man Lijnen Rotterdam N V to act as agent for Geo H Scales 

and Waterman Lnes Antwerp S A to flct as agent f9f Moor Line 

in the absence of foreign flag vessel competition with American flag s

Waivers will be granted under section 804 for a period of twoyear s 

to cancellation upon 90 days notice to the operator

SterlingF Stoudenmire Jr for Waterman Steamship Corpor

JohnE Oograme d EdwardAptaker as Public CounseL

REPORT OF THE BoARD

RALPH E WJL IN Ohairman THOMAS E STAKEM JR V46e OkaiJ

SIGFRID B UNANDER AIember

By THE BOARl

Waterman Steamship Corporation Waterman on June 14 

applied for awaiver from the provisions of section 804 oftheMer

Marine Act 1936 the Act which makes it unlawful for any 

tractor receiving an operating differential subsidy under title 

orany subsidiary affiliate orassociate of such contracto

or any officer director agent or executive thereof directly 

directly to act as agent for any foreign flag

vessel which com

with any American flag service determined to be essential as 

vided in section 211 of the Act The Board is authorized to 

such provisions under special circumstances and for good 

shown Waterman Steamship Corporation of Puerto Rico W

man P R is a wholly owned subsidiary of Waterman The fo

acts as a general agent in Puerto Rico for the Hamburg Amerik

Linie Hamhurg a West German steamship line in connection 

the berth service ofthat line between Puerto Rico and the Domi

174 6 F 
WATERMAN S S CORP SEC 804 APPLICATION 175

Republic The foreign flag vessels of Hamburg may compete with the

service which Lykes Bros Steamship Co Inc Lykes is authorized

to perform under its operating differential subsidy contract covering

service between Puerto Rico and the Dominican Republic We find

there may be competition on this route

We may waive the statutory prohibition against Waterman in view

of the activities of its subsidiary as to any competing foreign flag

vessel if special circumstances and good cause are shown We have

held that circumstances justifying awaiver are that 1 the proposed

foreign flag vessel use will not adversely affect subsidy payments on

the subsidized service 2 the applicant would suffer hardship if the

prohibition is enforced and 3 the proposed vessel use will have an

insignificant competitive effect on American flag service States Ma

ritne Lines 1UJ Sec 804 Waiver 6 F MB 71 1960 No evidence

was produced showing need for increased subsidy as a result of ap

plicant s relation to its subsidiary and applicant showed that theeffect

of its foreign flag agency operation on its regular operation would be

very little This is a special circumstance

No evi ence was presented no charge was made and we do not

assume that the unsubsidized subsidiary will receive any benefit from

subsidy payments to applicant Such benefit is unlawful Appli

cant s witness testified that the furnishing of the agency services are

important to the company They generate additional revenue which

contributes to the over all operating results of the company Ter

mination of the agency account undoubtedly would be a hardship

to Waterman because a valuable husiness rangement would be lost

with no provable gain to any other subsidjzed American carrier

This also is a special circumstance

Testimony developed that there would be no injury direct or in

direct to any American flag operator in Puerto Rico Any com

petitive effect on Lykes was apparently not deemed significant enough

to justify Lykes in intervening and presenting evidence on the sub

ject In the absence of such evidence we accept applicant s

testimony

as to the insignificance of any competitive effect and find it to be a

good cause for awaiver

In other respects we concur with the examiner that in the absence

of any competition between the foreign flag vessels of Geo H Scales

or of Moor Line Ltd and American flag service determined to be

essential as provided in section 211 of the Act no waiver is necessary

to permit Waterman Lines Antwerp S A and Waterman Lijnen

Rotterdam N V to act as agents for such operators

In the absence of later action by the Board this report shall serve

as written permission for the waivers granted herein

6 F M B
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 119

MOORE McCORMACK LINES INC ApPLICA TION UNDER SECTION 8

S1t1nnitted DecmnMr 8 1960 Decided December 8 1960

One voyage by the SS Mormacgu idc commencing on or about December 

lcarrying a cargo ot lumber or lumber prQducts from North Pa ific p

Atlantic ports found not to result in unfair competition to any 

firm or corporation engaged exclusively incoastwise or intercoastal S

and not to be prejudicial to the objects and policy of the Merchant 

Act 1936 as amended

Ira L Ewers for Moore McCormack Lines Inc

Donald J BfUInne l as Public Counsel

REPORT OF THE DEPUTY MARITIME ADMINISTRATOR

By THE DEPUTY MARITIME ADMINISTRATOR

Moore McCormack Lines Inc Mormac has applied for w

permission of the Maritime Administrator under section 805 

the Merchant Marine Act 1936 as amended the Act 46 

1223 for its owned ship the SS Mormacguide which is unde

charterto States Marine Lines Inc States MariJe to engage 

intercoastal voyage commencing at a North Pacific port on o

December 9 1960 carrying a cargo of lumber and lumber pr

for discharge at Atlantic ports Notice ofhearing was publis

the Federal Register ofDecember 1 1960 and hearing washeld 

the Deputy Maritime Administrator No petitions to interven

filed and no one appeared in opposition to the applicatioJ l

States Marine the charterer of the Mormacguide conduc

part of its regular steamship operations an eastbound inter

lumber service For the sailing here under consideration it h

unable to get any other suitable ship No exclusively domestic 

tors in the trade have objected to the use of the ship for this 

176 6 
MOORE McCORM CK LINES INC SEC S05 a APPLICATION 177

It is found and concluded that the granting of written permission

under section 805 a of the Act for the Mormacguide which is under

time charter to States Marine to engage in one intercoastal voyage

commencing at a North Pacific port on or about December 9 1960

carrying acargo of lumber to the Atlantic ports of Brooklyn New

York Newark New Jersey New Haven Connecticut and Camden

New Jersey willnot result in unfair competition to any person firm

or corporation operating exclusively in the coastwise or intercoastal

service and will notbe prejudicial to the objects and policy oftheAct

This report shall serve as written permission for the voyage

6 M A
FEDERAL MARITIME BOARD

No 879

STORAGE PRACTICES OF THE PORT OF LoNGVIEW COMMISSION A

PORT OF LoNGVIEW WASHINGTON

Submitted N1

ernber 10 1960 Decided DecemberlS 1960

1 Practices of the Port of Longview Commiss on of granting certain fr

and storage privdleges at Longview Wash under terms notauthorize

tariff found unduly prejudicial and preferential in violation oLsec

and unjust and unreasOnable in violation of section 17 of the S

Act 1916

2 Respondent required to cease and desist from its unlawful practices

Jolvn F McOarthy and Willard Wallcer for respondent

Robert J Blackwell and EdwardAptaker as Public Counse

REPORT OF THE BOARD

RALPH E WILSON Ohai1 1rlA2n THos E STAKEM JR Vice 

SIGFRID B UNANDER Member

By THE BOARD

We adopt the examiner s recommended decision to which exce

and replies have been filed Oral argument was not requested 

recommended decision is as foHows

This proceeding is an investigation pursuant to section 22 

Shipping Act 1916 as mnended 46 U S C 821 theAct ins

by the Board on its own motion by order of December 10 1959 

lished in the Federal Register of December 23 1959 24 F R 

to determine whether certain storage practices of the responde

Port of Longview Commission at Longview Wash constitu

uaking or giving of any undue or unreasonable preference or 

tage to any particular person locality or description oftraffic s

any particular person locality or description of traffic to any 

or unreasonable prejudice or disadvantage or constitute unj

unreasonable practices Iin violation of sections 16 and 17 of t

1

Practices relatIng to or connected with the receIving handling storlng or d

of property

178

6 F 
STORAGE PRACTICES AT LONGVIEW WASH 179

46 U S C 815 816 Hearing was held at Longview on March 29

1960

THE FACTS

The respondent operates the only public marine cargo terminal at

Longview andprovides wharfage dock and warehouse terminal facil

ities in connection with common carriers by water The respondent is

a

party to the Northwest MarineTerminal Association and to section

15 Agreement No 6785 on filewith the Board The executivesecretary

of the Association as required by the said agreement files each

member s terminal tariff with the Board Respondent is an other

person otherthan a common carrier by water subject to the Act and

to the Board s

jurisdiction

The Port ofLongview thePort is on the Columbia River north

of Portland Oreg about 50 miles downstream from Portland and

about 65 miles from the Pacific Ocean The Port s terminal is of the

quay type lying parallel to the river The dock is 2 130 feet long

and has four berths for ships The respondent has in excess of 286 000

square feet of shed storage space and at least 500 000 square feet of

open storage area Atleast eight warehouses and other miscellaneous

facilities are included in respondent s terminal facilities

The respondent is a municipal corporation under the laws of the

State of vVashington It e lbraces about two thirds of Cowlitz

County Itmay purchase or condemn lands operate wharves ware

houses and rail and water transfer terminal facilities Itmay raise

revenue by levy of an annual tax on taxable property in the port dis

trict Its terminal facilities are supervised by the manager ofthe Port

At least 17 steamship lines serve Longview The Port was recog

nized as an inbound terminal port hy the various steamship confer

ences serving the Orient trade one at atime over a period of six years

beginning in 1950 and the Ports

import business developed and in

creased with such terminal status Inbound cargo has increased from

6 371 tons in 1951 to 132 044 tons in 1958 Included in this traffic

wasdry bulk cargo of 46 951 tons and general cargo of 85 093 tons

Inbound general cargo of 94 000 tons is estimated for 1959 Plywood

and chrome ore are two of the main imports Export traffic in 1958

was 802 851 tons wheat being the principal commodity Domestic

outbound waterborne cargo consisting mainly of lumber decreased

between 1951 and 1958 but inbound domestic cargo increased some

whatduringthese same years On the whole the Porthas experienced

a

steady and substantial growth particularly considering that it has

only four berths for ocean going vessels

6 F M B

732 047 0 64 13
180 FEDERAL MARITIME BOARD

The Terminal Tariff No 2 of the Port filed with the Board 

tains its terminal rules rates and charges It includes provi

relating to free time wharf demurrage and storage On im

there is a free time period of 10 days following the first 7 00 

after the complete discharge of the vessel Free time is the nu

of days that cargo may oqcupy wharf premises before being su

to a specific demurrage charge to a storage charge or to rem

by the authorities at the expense of the owner of the goods W

demurrageis the penalty charge assessed on cargo remaining on w

premises after the expiration offree time unless the cargo is acc

for storage

This lO day free time provision has been disregarded consis

by the Port This is known by the members of the Northwest M

Terminal Association In the past eighteen years under the pr

port manager and prior to that time so far as the record show

Port never has charged any dem rrage regardless of the leng

time that the cargo remained on or off the pier Nor in that 

has anyone been required to remove cargo from the dock unde

threat of demurrage The respondent s manager frankly adm

that the 10 day free time provision in the tariff is absolutely w

less In his opinion the demurrage rules are meant for the m

politan area which must move its cargo out of the terminal 

inore liberal free time or free storage privileges actually offere

the Port of Longview were not incorporated into the Port s 

b cause it did not wish to inflict what it felt would be unfair 

petition upon the smaller members of the Northwest Marine Term

Association inasmuch as the Port felt these smaller members 

not have the space or facilities to handle the type of business 

up by the Port of Longview Practically all import cargo usin

facilities of the Port of Longview has enjoyed an extended free 

privilegeranging from 30 to 90 days

The Port has allowed any importer who wishes time to se

distri1mte his cargo at least 30 days free time or free storage W

the commodities are seaso al in nature such as Easter baskets 

must be distributed in a short time the Port has allowed 90 

On a third general class of imports incl ding plywood the Po

allowed importers to keep 20 percent of what they considered w

be their annual requirements without charge for storage prov

that they turned thatcargo about four timesa

year

The 20 percent requirement is a flexible rule for the industry 

not for a particular importer The rule is subject tq the judg

ofthe Port in a particular instance as to whether the cargo is mo

fast enough through the facilities ofthe Port As of October 17 

6 F M 
STORAGE PRACTICES AT LONGVIEW WASH 181

some 91 243 crates of plywood were stored at facilities of the Port

Of these 44 389 crates were in storage from zero to three months

28 432 crates from three to six months 15 887 crates from six to twelve

months and 2 535 crates for more than a

year The Port has not had

occasion to charge storage on plywood at any time

The amount of plywood held in storage was not considered im

portaIit so long as the owneror shipper moved a sufficient quantity

promptly in the judgment of the Port Generally 40 percent of

imports moves out within 15 days and some of the balance is stored

in the meantime One importer shipped a hundred times the amount

of plywood which was held in storage The individual commodity

held may be an odd length grade or specie

Although it has not assessed demurrage against nor charged for

storage of plywood on one occasion the Port requested a customer to

remove plywood from a warehouse when he had over 10 000 crates

of it of which almost three quarters had exceeded the 90 day rota

tional period of free storage negotiated or allowed by the Port outside

of its tariff provisions As requested these crates were moved except

for 1 000 crates which were sold The plywood which was held so

long in storage resulted from a situation wherein the importer at

tempted to perform a manufacturing process normally done abroad

but was unsuccessful in his attempt to compete with the imported

product

Again outside of its tariff provisions 30 days free time or free

storage has been granted by the Port on rattan furniture pottery

earthenware porcelainware woodenware lily bulbs steel machinery

tapioca flour and canned goods The Port has accorded 90 days free

time or free storage on bamboo blinds and poles toys Christmas

ornaments tea and miscellaneous general oriental imports vVhere

storage charges are assessed after the expiration of the 30 or 90 free

days they are not in conformity with those specified in the tariff

The respondent admits that the storage arrangements and charges

are the result of private negotiations between it and the owner ofthe

goods The parties in fact may dieker over the terms of storage z

Nevertheless the Port generally attempts to treat all similar shippers

alike of course subject to the exigencies of good solicitation in build

ing up the business ofthe Port

While no shipper terminaloperator port carrier or other person

has complained to the respondent s manager about the practice of

making free storage arrangements outside of those in respondent s

Terminal Tariff No 2 little weight can be accorded such fact Im

2

See appenddx A

6 F M R
182 FEDERAL MARITIME BOARD

porters are unlikely to complain about arrangements much 

liberal than those which are required under the tariff The P

liberal free time and storage arrangements are available wit

regard to the use of any particular common carrier serving L

view so there was no cogent reason for complaint by the carrier

Generally the Port of Longview advised prospective custo

that its Terminal Tariff No 2 did not apply and in effect tha

tariff could be ignored 3

In one letter appendix C it is s

that Tariffs as you know are of a general nature and Ifeel th

you have a particular type of movement in mind and can giv

detail volume origin and possibl destination we can quote 

much more satisfactorily

DISCUSSION AND CONCLUSIONS

The Port s failure to observe the free time and storage provis

of its Terminal Tariff No 2 is based apparently on its reliance 

item 11 entitled Reservation of Agreement Rights which prov

The Port of Longview reserves the right to enter into agreements with co

carriers shippers and or their agents concerning rates and services prov

such agreements are consistent with existing local state and nationa

governing the civil and business relations of all parties concerned

Tariffs mu be read in vhole and not in part Item 1 en

Application of Tariff clearly takes precedence over item 11 in 

circumstancesherein Item 1 provides

This tariff is published and filed as required by law and is therefore 

to the public to shippers consignees and carriers that the rates rule

charges apply to all traffic without specific notice quotations to or arr

ments withshippers consignees or carriers

Even under item 11 of the tariff agreements must be cons

with national law which includes theShipping Act 1916

In Practices Etc of San Fraru isco Bay Area Termina

US MC 588 1941 also 2 U S M C 709 1944 it was found am

other things that there was a lack of uniformity in and the app

tion of the respondent terminals free time rules regulations 

practices and that the manner in which they were applied affo

opportunity for unequal treatment of shippers The free time r

regulations and practices were found unduly prejudicial and pr

ential in violation of section 16 and unreasonable in violation of se

17 of theAct Reasonable free time periods not in excess of 10 

were prescribed with the single exceptio of 21 days on petro

products

s

See append1ces B and C

6

F

M 
STORAGE PRACTICES AT LONGVIEW WASH 183

The respondent points out that its operations differ from those

in Ban Francisco Bay Area Terminals case supra because there was

competition between terminals in that case whereas there is only one

terminal in the present proceeding The respondent contends that

a mere preference or discrimination between shippers carriers ter

minal operators ports or localities is not of itself unlawful and that

it is only when such preference or discrimination is unjust or un

reasonable and results in injury or damage to a particular person

or class of persons or advantage to another particular person or class

of persons that the same is prohibited by the Act Respondent cites

cases holding that ordinarily there must be a

competitive relation

between the shippers or between the types of traffic and that there

must be a

showing ofinjurious effect upon the traffic to justify findings

of undue preference or prejudice For example see Phila Ocean

Traffic BU1 eau v Export BB Corp 1 DS S B B 538 541 The cita

tions largely relate to section 16 of the Act and to matters ofpreference

and prejudice rather than to whether the practices are undue or

unreasonable under section 17 ofthe Act

There is no question that respondent offered and shippers availed

themselves of free time and free storage arrangements contrary to

those provided in respondent s terminal tariff Not only did these

arrangements differ from those in the tariff but also these arrange

ments differed from shipper to shipper and from commodity to com

modity The arrangements were negotiated or arranged with indi

vidual shippers This proceeding at least in part is similar to Ban

Fra lUJisco Bay Area Terminals supra Inboth instances the free time

rules regulations and practices were or are applied in such amanner

as to afford opportunity for unequal treatment of shippers Noone

was ever charged demurrage for any purpose or any amoun tat any

time in the experience of the manager of the Port of Longview re

gardless of the length of time that the cargo remained on or off

the pier As already seen free time or free storage has been granted

for 30 days 90 days six months and a

year and has varied even

among shippers of the same commodity Free time or free storage

has been given shippers of some classes of cargo far in excess of that

gjven to shippers ofother classes ofcargo

111 Ban Francisco Bay Area Terminals supra itis stated at pages

595 596 and at pages 603 605 as follows

Free time is the period allowed for the assembling of cargo upon or its re

moval from the wharves Upon its expiration demurrage charges are assessed

Obviously when demurrage is waived transit shed space the most valu

able in the terminal is being wasted This involves a cost which has to be

recouped somewhere and it is unreasonable that those shippers who do not use

6 F M B
184 FEDERAL MARITIME BOARD

the piers beyond the free time should be forced to bear the burden 

directly or indirectly The practice also affords an opportunity to discrim

between shippers

The next question is whether granting storage at noncompensatory ra

unduly preferential and prejudicial in violation of section 16 of the 

Act 1916 and an unreasonable practice in violation of section 17 thereof 

storage cases previously mentioned 1 U S M C 676 and 2 U S M C 4

tablish two propositions First thefurnishing of free storage facilities b

a reasonable period results in substantial inequality of service as be

shippers Second any preferred treatment by charges or otherw

certain classes of cargo results in discrimination against other cargo

Furthermore it should not be overlooked that the practice of furnishin

service below cost has the tendency to prevent any downward revisions of 

tor other services however justified they may be Clearly such a prac

unreasonable

The failure of respondent to abide by the provisions of its t

the mannerin which respondent s free time or free storage and st

rules are applied and the opportunity thereby afforded responde

provide unequal treatment of shippers and preferred treatme

certain classes of cargo clearly are practices unduly prejudicia

preferential in violation of section 16 of the Act and are unjus

unreasonable practices related to the receiving handling sto

and delivering of property in violation of section 17

While no shippers consignees or receivers are named as res

ents they should abide by the tariff rates charges and provi

relative to handling free time and storage of their property in 

nection with the transfer and transportation by water

We find that the failure of respondent to abide by the free 

and storage provisions in its tariff the manner in which respo

actually has provided free time and storage outside of its tariff 

visions and the opportunity thereby afforded respondent to pr

unequal treatment of shippers and preferred treatment of c

classes of cargo are practices unduly prejudicial and prefere

in violation of section 16 ofthe Act and unjust and unreasonable 

tices in violation of section 17 thereof

An appropriate order will be entered requiring respondent to 

and desist from the violations found to exist

6 F 
STORAGE PRACTICES AT LONGVIEW WASH 185

APPENDIX A

JANUARY 31 1956

Mr W D CAVANAUGH

William D Oavanaugh Associates

6J East 34th Street

New York16 N Y

DEAR BILL Thanks for your letter on National Potteries Co and

Iwould appreciate yourfollowingit up

As to storage Idid not anticipate ceramics so on this item you

may drop the storage rate to 2i per ton per day after 30 days Also

the rule is not hard and fast you may dicker and we should be able

to get together The only thing is Idon t believe it is wise to open

up a carte blanche or all we will get is the frustrated stuff while

otherportswillget the fast moving cargo

Best regards

PORT OF LONGVlEW

HARVEY B HART

Manager

HBH dr

Encl

APPENDIX B

SEPTEMBER 4 1956

Mr ERIC WAGNER

Del Valle Kahman 00

o Oalifornia Street

San Francisco 11 Oalif

DEA R SIR Ans ering your query of August 30 1956 the Port of

Longview owns very sizeable off dock warehousing facilities and it

is our policy in granting relief from conventional storage practices

to take into consideration three factors

1 That certain impor commodi ies require reasonable stocks

on hand to allow the importer to do business

2 That certain products must be assembled due to their sea

sonalsales characteristics

3 That some ultimate buyers of Import Commodities cannot

accept merchandise in massive deliveries but must have their flow

on a scheduledbasis

6 F M B
186 FEDERAL MARITIME BOARD

We therefore in selected cases by agreement with the unp

allot space in our off dock warehouses without additional charg

order to take care of these demands and of course to stimulate 

flow or cargo through the Port The Port of Longview Term

Tariff does notapply to these facilities

We will be glad to handle your import plywood as outline

telephone this morning waiving storage and accepting approxima

20 ofyour annual requirements at anyone time We will of co

expect you to use us on rast moving cargo as well as that whic

quires detention at the Port Plywood will be lotted accordin

bill or lading and vessel and we would appreciate receiving thro

you or your rorwarder packing lists which will allow us to segre

the material by size glue type and quality Delivery will be m

on your orders and we request that we be allowed the privilege

picking cases rrom rull range numbers rather than individual 

numbers On loading out our packing list will be sent to you na

individual case numbers shipped On pCP cargo all charges 

absorbed jointly by the ocean and rail carriers On local cargo 

minal charges willbe billed as rollow

Wharfage 50 per 2 000 lb until October 1 and 704 there

Car Loading 2 63 per 2 000 lb including dunnaging and bloc

Handling According to Steamship Conference Tariffs 

per 2 000 lb or 40 cu ft Maximum of 2 0

2000 lb

We very much appreciate your inquiry and have handled a 

deal or your material which has been sold to otherpeople and we 

you see fit to make use ofour racilities

Very truly yours

PORT OF LoNGVIEW

HARVEY B HART

Manag

HBH 1

ApPENDIX C

APRIL 5 19

AIRMAIL

Mr J P OHLER

Assistant General Traffie Manager

Singer Sewing Maehine 00

149 Broadway

New York N Y

DEAR MR OHLER Atthe request of Mr Julius R Jensen Man

Cowlitz County Industrial Bureau we are sending you a broc

6 F M 
STORAGE PRACTICES AT LONGVIEW WASH 187

outlining the facilities of the Port of Longview and also Terminal

Tariff 2 outlining charges and services

Taritfs as you know are of a general nature and Ifeel that if you

have a particular type ofmovement in mind and can give us details

volume origin and possible destination wecan quote you much more

satisfactorily Ihope you will give us this privilege

It is our understanding that Mr Jensen is attempting to prevail

upon your company to locate a warehousing operation at Longview

We have much to offer from a transportation standpoint and will be

happy to assist you in any way possible

Very truly yours

PORT OF LONGVIEW

H B HART

illanager 

HBH mij

cc

Mr Julius Jensen

Mr William Cavanaugh

Encl

6 F M R
188 FEDERAL MARITIME BOARD

ORDER

At a Session of the FEDERAL MARITIME BOARD held a

office in Washington D C on the 13th day ofDecember A D 19

No 879

STORAGE PRACTICES OF THE PORT OF LONGVIEW COMMISSION AT 

PORT OF LONGVIEW VASHINGTON

This proceeding having been initiated by the Board upon its 

motion as authorized by section 22 of the Shipping Act 1916 

D S C 821 and having been duly heard and submitted and inv

gation of the things and matters involved having been made and 

Board on the date hereof having made and entered of record a

re

containing its conclusions and decision thereon which repo

hereby referred to and made a part hereof

Itu ordered That

1 Respondent be and it is hereby notified and required a 

hereafter abstain from the practices herein found to be unlawful u

sections 16 and 17 of the Shipping Act 1916 as amended and b 

notify the Board withinten 10 days from the date of service he

whetherrespondent has complied with thisorder and if so the ma

in which compliance has been made pursuant to Rule 1 c o

Board s Rules of Practice and Procedure 46 CFR 2013

2 The proceeding be and it is hereby discontinued

By theBoard

Sgd THO IAS LISI

Secreta

6 F M 
FEDERAL MARITIME BOARD

No 853

RAYMOND INTERNATIONAL INC

v

VENEZUELAN LINE

Decided January 9 1961

Classification of fibre forms for concrete found to be correct Rate charged

on a shipment of fibre concrete forms from the port of New York N Y

to Las Piedras Venezuela found not to be in violation of sections 15 16

or 17 of the Shipping Act 1916 Reparation denied Complaint dismissed

Gerald H Ulman for Raymond International Inc complainant

John R Mahoney and David Orlin for Venezuelan Line respon

dent

REPORT OF THE BOARD

RALPH E WILSON Chairman THOMAS E STAKEM Vice

Chairman SIGFRID B UNANDER Member

BY THE BOARD

1 PROCEEDINGS

This is a complaint by a shipper against a common carrier by

water alleging discriminatory overcharges on a shipment in 1957

of fibre tubes called Sonovoids from New York New York to

Las Piedras Venezuela on the Venezuelan line Detriment to the

commerce of the United States and unreasonable prejudice and

disadvantage to the complainant in violation of Sections 15 16 and

17 ofthe Shipping Act 1916 Act are alleged The answer denies

these charges Hearings were held followed by briefs and a

189

6 F M B
190 FEDERAL MARITIME BOARD

recommended decision by an Examiner dated May 31 1960 

recommended decision was that none of the charges and all

tions had been proven Exceptions and a

reply were filed 

lowed by oral argument

II FACTS

Complainant Raymond International Inc Raymond 

November 1957 delivered to respondent Venezuelan L

Venezuelan 412 pieces of hollow fibre tubes known as S

voids for transportation to Las Piedras Venezuela The shipm

was described in an ocean bill of lading showing Raymond as 

shipper and Compania Shell de Venezuela Ltda as the 

signee The bill of lading described the property as fibre 

duit and handwritten above these typewritten words is 

crete molding forms

The Sonovoids comprising the shipment in question were f

tubes from 20 to 20 8 long and from 14 to 18 7 in out

diameter with a wall thickness of 250 and 300 made of p

of paper spirally wound into a round tube A special ply of k

paper and asphalt is incorporated into the layers and the inte

and exterior surfaces are uniformly wax impregnated The tu

were used by the shipper to create empty spaces or voids in

pre cast or cast in place concrete slabs columns walls and p

to make them lighter and to use less concrete They were ad

tised and sold for this purpose as shown by descriptive leaflets 

pages for insertion in standard product specification catalog

The evidence showed they could also be used for conduits or p

where durability was not required but were not extensively 

for these purposes nor are they currently advertised or sold 

such purpose

There were four potentially applicable tariff rates observed 

the carrier The rates were those of the United States Atla

and Gulf Venezuela and N etherla ds Antilles Conference w

the Venezuelan Line had agreed to maintain even though it 

not belong to this conference see Venezuelan agreement of J

19 1950 and F M B Agreement No 7777 approved Augus

1950 The rates they agreed to maintain are found in Fre

Tariff VEN 7 Item 1000 A classification was used rea

Forms viz Fibre for concrete columns Classificatio

This rate was the lowest of the three considered by the car

The tariff also provided for a measurement by weight and 

6 F M 
RAYMOND INTERNATIONAL INC v VENEZUELAN LINE 191

volume with the measurement producing the highest revenue to

be used Since the tubes were relatively light the volume measure

ment was used

The complainant contends that the fourth available rate should

have been applied covering Conduits fibre viz over 12 but

not over 20 inside diameter weight Class 3 rate The Class

3 rate was 48 00 perton weight

ill DISCUSSION

None of the classifications in the tariff exactly fits the property

transported The question is whether the classification applied

by the carrier reasonably describes the property We have held

that descriptive words in tariffs must be construed in the sense

they are generally understood and accepted commercially Shippers

cannot be permitted to avail themselves of a strained and un

natural construction Thomas G Crowe et al v Southern S S et

all U S S B 145 147 1929 The proper test is the meaning

which the words used might reasonably carry to the shippers to

whom they are addressed U S v Missouri Pac RR Co 250 F

2d 805 807 5th Cir 1958 Use in a few isolated instances does

not contradict the essential characteristics of the property Mis

classification and Misbilling of Glass Tumblers and Other Manu

factured Glassware Items as Jars 6 F M B 155 1960 In our

opinion the reasonable construction of the tariff language is the

tubes are forms for concrete and are made of fibre

Since the property was not precisely described in the tariff

reference was made to the manufacturer s descriptive literature

which calls them laminated fibre tubes and shows how they are

used with concrete The complainant s traffic manager referred

to them as cardboard fibre concrete forms hence the forms

classification was considered proper The forms description

was sought to be excluded from consideration because forms are

used outside and concrete is poured into them The tubes on the

other hand were used on the inside and concrete was poured

around them For this reason they were said to be fillers or dis

placers of concrete While this is partly true we concur with the

Examiner that it is likewise true that they are inte rnal forms for

shaping the concrete that is poured around them Under the

circumstances the selection of the fibre forms classification in

conjunction with their use with concrete was reasonable and was

the closest description in the tariff applicable to these particular

6 F MB
192 FEDERAL MARITIME BOARD

objects The fact that the bill of lading used the word cond

does not alter the essential characteristics of the produet as un

stood by the shipper who used them with concrete

We also agree with the Examiner that in view of the ship

characteristics ofthe tubes the rate charged by the responden

a measurement basis was not excessive and therefore was 

detrimental to the commerce of the United States in violatio

Section 15 of the Shipping Act 1916 The fact that the 

charged by respondent on a measurement basis was 22570 of 

value of the shipment is not conclusive in view of the amoun

space taken on board a ship its requirements for a protective 

paulin covering and the difficulties of handling the property

The validity of the tariff regulation is not compromised by 

excessive ratio of value of the products to freight rate resu

from the application of a volume measurement rate instead 

weight rate The cargo has what are known as balloon c

acteristics because the cargo takes up a large amount of spac

relation to its weight and is not compressible Historical conc

of rate making have established the validity of using volume m

urement rates where the measurement ton rates to weight 

rates ratio is extreme as in this case

The respondent was also shown to have given a rate on awe

basjs under the conduits fibre classification to the Orangeb

Manufacturing Company for a shipment of pipe instead of o

measurement basis as it did to complainant This was compla

of as being a discrimination between shippers entitling the c

plainant to reparations for violations of Sections 16 and 17 of 

Act Orangeburg however is not a competitive product beca

of its different characteristics and use It is a different prod

altogether In the manufacture of so called Orangeburg f

conduits fluid pulp is built into tubular shape on a

rota

mandrel and at the same time is felted under pressure which 

duces a dense and strong pipe which is later placed in ta

where it is thoroughly impregnated under high vacuum with h

coal tar pitch Finished it is 7570 pitch and 2570 fibre by we

which makes it much denser than the cardboard forms It is u

primarily as an electric cable conduit after being encased in 

crete Its shipping characteristics are entirely different b

heavier and more durable Its smaller size and greater den

make aweight measurement as abasis ofrate charges appropri

An order will be entered dismissing the complaint

6 F M
RAYMOND INTERNATIONAL INC v VENEZUELAN LINE 193

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 3rd day of January 1961

No 853

RAYMOND INTERNATONAL INC

V

VENEZUELAN LINE

This proceeding being at issue on complaint and answer on file

and having been duly heard and submitted by the parties and full

investigation having been had and the Board on the date hereof

having made and entered of record a report containing its con

clusions and decision thereon which said report is hereby referred

to and made part hereof

It is ordered That the complaint be and is hereby dismissed

By the Board

Sgd THOMAS LISI

Secretary

SEAL

6 F M B
FEDERAL MARITIME BOARD

No 91

GRACE LINE INC ApPLICATION TO SERVE

PORT AU PRINCE HAITI FROM U S ATLANTIC PORTS

Decided January 13 1961

Grace Line Inc service to Port au Prince Haiti from United States Atlantic

ports approved Existing service by vessels of United States Registry

operated on a service route or line served by citizens of the United

States determined to be inadequate and that in the accomplishment of

the purposes and policy of the Merchant Marine Act of 1936 additional

vessels should be operated thereon

Odell Kominers J Alton Boyer E R Lutz and T B Westfall

for Applicant Grace Line Inc

Paul A Bentz David J Markun and Theodore P Daly for

Intervener Panama Canal Company

Robert E Mitchell Edward Aptaker and Robert B Hood Jr

Public Counsel

REPORT OF THE BOARD

RALPH E WILSON Chairman THOMAS E STAKEM Vice

Chairman SIGFRID B UNANDER Member

BY THE BOARD

Grace Line Inc Grace Line as required by its Operating Dif

ferential Subsidy Agreement with the Federal Maritime Board

Contract No FMB 49 by letters of February 26 and March 3

1959 has requested permission the Contract refers to obtaining

the prior approval of the United States to commence service

from U S Atlantic ports to Port au Prince Haiti in accordance

with a proposed schedule which accompanied its request

195

6 F M B

732 047 0 64 14
196 FEDERAL MARITIME BOARD

By an order dated March 23 1959 we gave public notice of 

Grace Line application and requested those having any interes

the application and desiring a hearing thereon to notify the S

retary 24 F R 2374 published March 26 1959 The Pana

Canal Company Panama Canal by its President was the o

petitioner for a hearing Hearings were held before an Exami

and a Recommended Decision was served May 5 1960 In t

decisio service provided by ships of United States registry w

found to be adequate

Exceptions were filed by Grace Lines and by public coun

Thereafter the Panama Canal sole intervener and opponent of 

Grace Line application asked for and was granted leave to w

draw from the proceeding

Thereafter it appearing 1 that Panama Canal had withdra

from the proceeding and 2 that the facts and circumstances u

which the recommended decision was based may have materi

changea we ordered that the proceeding be remanded to the 

aminer for a further hearing and recommendation A furth

hearing was held November 23 1960 As a result of this hear

the Examiner found in an initial decision served December 

1960 that U S flag service to Port au Prince Haiti was n

inadequate

The Merchant Marine Act 1936 clearly requires the deve

ment and operation of a privately owned merchant marine un

U S registry sufficient to carry asubstantial portion of the wa

borne export and import foreign commerce of the United Sta

and to provide shipping service on all routes essential for m

taining the flow of such commerce at all times Title V and T

VI provi ie the forms of aid which Congress deemed essential 

accomplishing this

Provisions of Sections 704 and 705 of the Act become incre

ingly significant in translating the mandate of Congress tha

privately owned merchant fleet be developed and maintain

These sections emphasize that the government owned vessels t

being operated were to be removed from service as soon as p

ticable

C

It is to be noted that after February 10 1961 the activities of Panama Canal Line w

confined solely to the transportation of passengers and freight forthe account of the Pa

Canal Company and the Canal Zone government pursuant to a

directive by the Preside

a memorandum dated December 21 1960 to the Secretary of the Army Ii any conside

is to be given to this limitation on Panama Canals

service it would be to further inc

the inadequacy of non governmental service to Port au Prince Haiti and to create a 

sponding need for Grace Lines proposed service

6 F M
GRACE LINE INC APPLICATION TO SERVE HAITI FROM U S 197

The establishment of any steamship line by the United States

Maritime Commission could only be accomplished if the foreign

trade of the United States was not served adequately by privately

owned and operated U S flag steamship lines Section 705 And

where any such line may have been established the Congress de

clared in that same section of the law it shall be the policy

to encourage private operation by selling such lines to citizens

of the United States Emphasis added Grace Line is a

privately owned shipping line and in reaching our conclusions on

inadequacy ofservice competing government owned service should

not be considered

Even if we should include Panama s carryings we find the ser

vice provided by U S flag carriers to be inadequate

The overall participation by U S flag vessels including Pana

ma s in the entire North Atlantic Port au Prince Trade both

outbound and inbound fell from 50ro for the period 1955 1958 to

40 7 in 1959 It declined to 57ro in 1958 from 64ro in 1957

Exception was made to the Examiner s finding that U S flag

service in the New York segment of the North Atlantic Haiti

trade is adequate We do not agree with the Examiner that our

decision in Gulf South American Steamship Co Inc Service

Extension Route 31 5 F M B 747 1959 is controlling in this

case

1 New York is not the dominant port to the extent that New

Orleans is for the movement of outbound cargo as compared with

other Gulf ports New York s percentage share of total North

Atlantic outbound traffic in 1959 was 511 ro and appears to be

declining 93ro in 1957 and 78ro in 1958 New Orleans corre

sponding share in the first 6 months of 1958 was 72 of the total

tonnage of liner commercial cargo against the remainder for other

Gulf ports

2 U S flag participation in commercial cargo including Pan

ama s carryings outbound in liner service is not as dominant

from New York as it was from New Orleans being most recently

60 6ro in 1959 as against 83ro from New Orleans

3 Inthe total North Atlantic trade U S flag outbound partici

pation for the latest period 1959 is 31 and has declined the

last 3 years The comparable U S flag participation in the Gulf

area was 61 for the last six months in 1958

We find that Grace Line is not operating an existing service on

Trade Route No 4 between U S North Atlantic ports and ports

6 F M B
198 FEDERAL MARITIME BOARD

in Haiti and that the service already provided by ships or vess

of U S registry in such service is inadequate within the mean

of Sec 605 c and that in the accomplishment of the purpo

and policy of the Act the additional service proposed by Grace L

should be permitted and that Sec 605 c is not a bar to 

grantit tg of an operating differential subsidy to Grace Line 

the operation of additional vessels on the route in accordance w

its proposed schedule

6 F M 
FEDERAL MARITIME BOARD

No 833

MAATSC APPIJ ZEETRANSPORT N V ORANJE LINE ET AL

v

ANCHOR LINE LIMI lED ET AL

Decided January fa 1961

1 Upon complaint respondents Anchor Line Ltd The Bristol City Line of

Steamships Ltd Canadian Pacific Ry Co The Cunard Steamship Co

Ltd Furness Withy Co Ltd Manchester Liners Ltd The Ulster

Steamship Co Ltd Head Line Lord Line found to have violated

the provisions of Sec 15 of the Shipping Act 1916 as amended which

require common carriers by water to file immediately with the Federal

Maritime Board a true cOP or a true and complete memorandum of

every agreement with another such carrier to which it may be a party

or conform to in whole or in part fixing or regulating transportation

rates

2 Upon complaint respondents Anchor Line The Bristol City Line of Steam

ships Ltd Canadian Pacific Ry Co The Cunard Steamship Co Ltd

Furness Withy Co Ltd The Ulster Steamship Co Ltd Head Line

Lord Line found to have violated the provisions of Sec 15 of the

Shipping Act 1916 as amended which require common carriers by

water to file immediately with the Federal Maritime Board a true copy

or a true and complete memorandum of every agreement with another

such carrier to which it may be a party or conform to in whole or in

part allotting ports or restricting or otherwise regulating the number

and character of sailings between ports and providing for exclusive

preferential or cooperative working arrangements

George F Galland G Nathan Calkins Jr Robert N Kharasch

and Thomas K Roche for Oranje Line etal

Ronald A Capone Cletus Keating Elmer C Maddy and Robert

E Kline Jr for Anchor Line Limited et al

Edward Schmeltzer Edward Aptaker and Robert E MitcheU

as Public Counsel

6 F MB

199
200 FEDERAL MARITIME BOARD

REPORT OF THE BOARD

RALPH E WILSON Chairman THOMAS E STAKEM Vice

Chairman SIGFRID B UNANDER Member

BY THE BOARD

1 PROCEEDINGS

This is a

reopened proceeding resulting from an order of S

tember 19 1960 ordering re argument in the matter if reques

by any of the parties On September 21 1960 the attorneys 

the complainants requested re argument

The complainants are a group of common carriers by wate

the foreign commerce ofthe United States operating between po

of the United Kingdom of Great Britain and Great Lakes and 

Lawrence River ports in the United States and Canada T

consist of the following companies Maatschappij Zeetranspo

N V a Netherlands Corporation Oranje Line A S Luksf

A S Dovrefjell A S Falkefjell and A S Rudolph Norwegian 

porations Fjell Line and Smith Rederi A B and Rederiak

bolaget Ragne Swedish Corporations Swedish Chicago Lin

Liverpool Liners Limited a British corporation and A B 

Nordstrom Co OY a Finnish corporation Nordlake Line

The case has been considered on the present record and on 

re argument Our previous report on such record appeared i

F M B 714 was decided December 14 1959 and served Marc

1960 Re argument was ordered as the result of an appeal fr

the Board s report filed in the United States Circuit Court 

Appeals for the District of Columbia in No 15 700 The app

contends that the Board s order was unlawful for want o

majority vote on the issues involved in Docket No 833 Oral ar

ment was held on November 30 1960 The issues were lim

to the complaint in No 833 alleging violations of sections 14 

15 of the Shipping Act 1916 as amended Act 39 Stat 

46 U S C 812 814 as follows

1 The respondents Anchor Line Limited Anchor The B

tol City Line of Steamships Ltd Bristol City Canadian PaG

Railway Company Canadian Pacific The Cunard Steams

Co Ltd Cunard Ellerman s Wilson Line Limited Ellerma

Furness Withy Co Limited Furness Manchester Liners L

Manchester The Ulster Steamship Company Ltd Head L

Lord Line Head Lord between January 1958 and Ma

6 F M 
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 201

28 1958 acting in concert notified shippers in the trade from

the United Kingdom to United States Great Lakes ports of freight

rates contained in a jointly agreed upon tariff and quoted rates

therefrom without the Board s approval

2 The Ulster Steamship Company Ltd Head Line Lord

Line The Anchor Line Limited and The Bristol City Line of

Steamships Ltd without Board approval entered into a

coopera

tive working arrangement calling for a pooling of vessels alter

nation of sailings and joint service from the port of Glasgow for

the 1958 navigation season together with understandings for the

maintenance of uniform rates

3 The respondents executed Agreement No 8400 controlling

and regulating competition and filed it with the Board for ap

proval on November 5 1957 knowing at the time that there was

then in existence Agreement No 8140 which had created with the

Board s approval a conference in substantially the same trade

which Agreement No 8400 purports to cover Agreement No

8400 is alleged to be unlawful

4 The aforesaid violations and Agreement No 8400 are ele

ments of a conspiracy to drive complainants from the trade be

tween the United States and Canadian Great Lakes and St

Lawrence River ports on the one hand and ports in the United

Kingdom on the other

5 The respondents are also parties to agreements understand

ings and cooperative working arrangements whereby they have

apportioned among various of their members ports or ranges of

ports on the United States Great Lakes in conjunction with ports

or ranges of ports on the Canadian shore of the Great Lakes as

well as Canadian ports on the St Lawrence River Such agree

ments understandings and arrangements seriously restrict com

petition between the respondents and others in foreign commerce

of the United States and eliminates or destroys competition

among the respondents in such commerce of the United States

between the Great Lakes and the United Kingdom and Eire None

of the foregoing agreements understandings or arrangements is

reflected in Agreement No 8400

These proceedings are further limited to a review of the

alleged violations of Sec 15 of the Act

6 F MB
II FACTS

FEDERAL MARITIME BOARD 202

The facts relate to the evidence showing a alleged un

proved agreements fixing or regulating transportation rates 

unapPloved agreements controlling regulating preventing 

destroying competition or allotting ports or restricting or ot

wise regulating the number and character of sailings betw

ports or providing a cooperative working arrangement and 

possible conspiracy to drive complainants from the trade betw

United States and Canadian Great Lakes and St Lawrence R

ports on the one hand and ports in the United Kingdom of G

Britain on the other hand

On January 18 1958 the Board published a notice in the F

eral Register 23 FR 349 that the respondents had filed 

approv al under Sec 15 of the Act a proposed agreement No 8

tocreate a new conference to be known as the British Westbo

Conference from Great Britain and Northern Ireland and Eir

Great Lakes ports in the United States In preliminary meet

leading to the organization of a conference secretaries were de

nated to draft the conference agreement and to proceed with 

compilation of adraft tariff to be used by the conference A d

in at least 79 serially numbered copies was prepared and 

mitted to the member lines in the proposed conference Revis

were Circulated bearing effective dates Each line keeps a

and receives amendments keeping the tariff up to date The se

tary is notified each day of the rates each line qqotes in com

tion with non conference outsiders The cover page desc

the tariff as applicable to traffic to the same ports as the p

covereq by the proposed conference agreement A draft t

was issued some time prior to February 7 1958 The date on 

cover of the more recent tariff in evidence is April 1958 

tariff was described by the secretary as the basic tariff unde

proposed agreement and the one which would be printed when 

agreement was approved The secretary said the lines natu

refer to the tariff in quoting rates and that the tariff w

likely be a tariff that they were free to use if they like s

thing they normally refer to to find out what would be somew

about the basis of the rates None of the respondents sugge

that they had any othertariff

Thereafter the record showed that six different carriers in 

conference quoted with two exceptions identical rates in resp

to many shippers inquiries relative to specified commoditie

6 F M 
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 203

designated ports Rate quotation letters written in April 1958 to

shippers covering twelve commodities or commodity classifications

showed identical quotations in each case where two or more lines

quoted rates on a particular commodity to aparticular destination

In the case of every commodity except linoleum tiles the proposed

tariff rates were quoted but even on the tiles the four quoting

carriers gave identical rates The tariff rates were not available

to nonconference members A variation in rate quotations on two

commodities by one of the members was shown

There are two groups of alleged cooperative arrangements The

first is the Anchor Bristol City Head Lord lines arrangement

nd the second is the Canadian Pacific Cunard Furness lines

arrangement

The second group of lines is not explicitly identified by their

names in the complaint but the names of the participating lines

were established during the hearing and such lines are considered

as being covered by the part of the complaint referred to in item

5 above

With regard to the first four ships the M V Korbach Fair

Head Urania and Ballygally Head were advertised to provide

freight service by three lines Bristol City Anchor and Head

Lord from the three ports of Avonmouth Glasgow and Liverpool

to American ports in the Great Lakes The M V Urania was a

German registered ship chartered to The Ulster Steamship Com

pany Ltd Head Lord Line and the MV Korbach was a Ger

man registered ship chartered to Bristol City The M Vs Fair

Head and Ballygally Head are British registered ships owned by

the Ulster Steamship Co Ltd Head Lord Line The adver

tisements appeared in various publications and by announcements

in 1958 Closing dates for cargo at Glasgow were from March

27 1958 through October 11 1958 The M V Korbach was adver

tised by Anchor Line for closing of cargo from Glasgow and by

Bristol City Line for closing of cargo from Avonmouth 6 days

later destined for Detroit and Chicago and on an if inducement

basis for Cleveland and Milwaukee The same vessel was similarly

advertised for a voyage with a two day interval between Avon

mouth and Glasgow about a month later by the same two lines

Next the M V Fair Head was advertised by Anchor Line with a

closing for cargo from Glasgow five days after the same vessel

was advertised by Head Lord Line for closing for cargo from

Bristol The same vessel and the same companies offered similarly

spaced departures from the same cities in June and August The

6 F M B
204 FEDERAL MARITIME BOARD

M V Ui ania was advertised by all three lines from the c

they served Bristol City Avonmouth Head Lord Liverp

and Anchor Glasgow with about a 5 day interval between e

city for departures in April and June and a Liverpool Glagow 

parture in August The M V Ballygally Head was advertised 

Anchor Line and Head Lord for Glasgow Liverpool cargo c

ings at about three to seven day intervals in May July and S

tember The result of such voyages is that three of the f

vessels were used by two companies and one vessel was used 

three companies from the cities served by each of the lines

An Anchor Line handbill stated its pleasure in announc

their Freight Service between Glasgow and the American port

the Great Lakes during the 1958 open water season and lis

the above named ships The handbill stated that freight enga

ments and all cargo received and shipped will be subject to 

terms conditions exceptions and liberties of the Company s us

form of Wharfinger s Receipt and or Bill of Lading Other 

hibits in the record showed Anchor Lines offers of service for 

season and generally describe it as a carrier although somew

later in May 1958 it began calling itself Loading Brokers T

change occurred after the complaint was filed in this case and a

the Conference Secretary told the managing director of Anc

that their circular would be misinterpreted

Although a ship used by Bristol City called at Glasgow the 

vertising of Bristol City did not describe Anchor as an agen

loading broker or make any reference to Anchor or to Glasg

but did list its agents in other ports than Glasgow Anchor L

quoted its rates in response to shippers inquiries and referred 

details of our sailing for the 1958 season

Bristol City also advertised departures from Avonmouth 

Detroit and Chicago and vice versa and other American G

Lakes ports if inducement Head Lord advertised departu

from Liverpool to U S A Great Lakes Ports Chicago and Det

also Cleveland and Milwaukee if inducement The M 

Korbach Fair Head Ballygally Head and Urania were used 

noted above

With regard to the second group service to United States G

Lakes ports in 1957 was also offered in advertisements by Ca

dian Pacific Cunard and Furness A handbill announcement 

advertisements in Lloyd s Loading List Supplement and 

Handy Shipping Guide announced service London Great La

Direct Canadian Pacific Cunard Furness to Cleveland Det

6 F M
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 205

Chicago listed the locations of the loading berths of each line

in London and stated For Rates of Freight and other informatio n

apply to giving three London addresses and telephone numbers

Or any other Canadian Pacific Cunard and Furness Line Office

or Agency At least fourteen such notices and others of similar

import were shown for the months of March through May 1957

There was evidence in the announcements of an exchange of ships

between Cunard and Canadian Pacific but not in the service to

Cleveland Detroit and Chicago The service to these ports how

ever was alternated between the Cunard and Furness ships a

about one week intervals Cunard ships called at both Canadian

and Great Lakes ports in the U S but Furness ships never called

at Canadian ports and Canadian Pacific ships never called at

Great Lakes U S ports As regards American ports Cunard ships

never called at Chicago The proposed conference agreement dis

closed still further refmements in restrictions on service to Great

Lakes ports in the United States

The following ships were German registered ships chartered in

1958 as noted M V s Ei in Nuebel andBe ioni Nuebel to Cunard

Otto Nuebel and August Schulte to Canadian Pacific Lissy Schulte

and Maria Schulte to Furness The Erin Nuebel was advertised

for cargo as both a Canadian Pacific and a Cunard ship The Otto

Nuebel was likewise advertised for cargo by these two lines

The Chairman of Furness in his annual review ofthe Company s

affairs at the annual General Meeting on September 25 1957 had

the following to say with possible reference to these arrangements

For two years prior to 1957 we have operated a service in conjunction

with others from London to ports in the Great Lakes We consider this

to be a necessary development partly in protection of our Canadian business

and partly to ensure our participating in the expansion of trade which it

is anticipated will occur when the St Lawrence Deepwater Seaway is

opened for traffic in 1959 From the commencement of the current season

Le the opening of the St Lawrence River to navigation we have estab

lished our own direct service from London to Canadian and United States

Lakes ports including Toronto Hamilton Cleveland Detroit Milwaukee and

Chicago in friendly association with the Cunard Steam Ship Co Ltd and

the Canadian Pacific Railway Co Only small ships can be employed until

the St Lawrence Seaway is completed after which date larger and conse

quently more economical tonnage will be introduced into the service provided

developments justify such expansion

The foregoing was explained as follows in a stipulation The

statement was made to Furness Withy Company Stockholders

and was intended to let our Stockholders know that we had entered

this trade in our own right in place of the earlier service to Cana

6 F M B
206 FEDERAL MARITIME BOARD

dian Lake ports which was previously operated in conjunction w

others

The phrase in friendly co operation sic means prec

what it says no more and no less and friendly means the oppo

of unfriendly There is no agreement written or verbal but w

out any obligation to do so we endeavor not to tread on their 

in the hope that they similarly will endeavor to avoid treadin

ours That is all there is to it

Another cooperative arrangement is thought to be shown b

joint notice entitled Notice to Shippers and Consignees d

March 1 1958 as follows

Shippers and Consignees are hereby notified that the undernoted 

will each operate regular Westbound services from their customary 

ports in the United Kingdom and Eire DIRECT to the United States G

Lakes ports principally Cleveland Detroit Chicago and Milwaukee

The direct services will commence with the opening of the St Lawr

Navigation this year i

e approximately 1st April 1958 and intere

Shippers or Consignees are invited to apply direct to the individual Line

information concerning the frequency of service and the freight rates 

plicable on traffic shipped by the selected Line s Direct vessels

Anchor Line Ltd Ellerman s Wilson Line Ltd

Bristol City Line Furness Withy Co Ltd

Canadian Pacific Railway Co Head Line Lord Line

Cunard Steam Ship Co Ltd Manchester Liners Ltd

In October 1956 the member lines of the North Atlantic W

bound Freight Association recorded in a minute that severa

them Anchor Cunard Furness Head Lord and Manches

were operating independently to United States of America G

Lakes ports that others intended to do the same and that McD

mid Co had been instructed to draft an appropriate confer

agreement McDiarmid Co is a professional organizatio

conference secretaries who administer conference agreemen

This is the same agreement that was prepared in connection 

the tariff rates and regulations noted above Anchor howe

denied it operated any such independent service

By letter of December 30 1957 McDiarmid submitted for B

approval a signed agreement identified as F M B No 8400 co

ing Westbound trade Agreement No 8440 was submitted l

and covered Eastbound trade In Dockets 834 and 843 the B

refused to approve the two agreements The agreements wer

preparation for operations in 1958 to the Great Lakes

The respondents are participants in a system of territoria

visions and ofport assignments covering the routes of their ves

in the areas served by the proposed conference agreement 

6 F M
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 207

United Kingdom ports are served as follows Anchor Line serves

only Glasgow Bristol City Line serves only Avonmouth and

Bristol channel ports Manchester Liners serves only Manchester

Head Lord serve only Liverpool Belfast and Dublin Cunard

Furness and Canadian Pacific serve London and Liverpool Cana

dian and United States Great Lakes ports are served as follows

Anchor Bristol City Manchester Liners and Head Lord serve

the full range of United States Great Lakes ports Cunard and

Canadian Pacific serve the United States Great Lakes ports only

as far as Detroit Furness serves thes ports and Milwaukee and

Chicago

In addition to these United States Great Lakes ports the evi

dence disclosed that the same lines were participants in a pattern

of port allocation along the United States Atlantic coast and ap

pear to be restricted so as to not serve areas served by other British

lines

III DISCUSSION

The violations complaineq of concern the failure of the respond

ents to the etent that they are common carriers by water in the

foreign commerce of the United States to file immediately with

the Board a true copy or if oral a true and complete memoran

dum of every agreement with another common carrier by water

to which it may be aparty or conform in whole or in part dealing

with certain subjects The subjects of this proceeding are agree

ments fixing or regulating transportation rates or fares control

ling regulating preventing or destroying competition and allot

ting ports or restricting or otherwise regulating the number and

characteristics of sailings between ports or in any manner pro

viding for an exclusive preferential or cooperative working ar

rangement The term agreement under Sec 15 and in this

report includes understandings conferences and other arrng e

ments The Board may by order approve or disapprove agree

ments Before approval and after disapproval agreements are

unlawiul

The basis of the complaint is that the respondents herein were

acting as though they were carrying out the proposed but unap

proved conference agreement s obligations by using the freight

rates contained in the draft tariff which had been prepared First

the respondents distributed 79 copies of the tariff among them

selves and second the respondents quoted the tariff rates to

shippers

6 F MB
208 FEDERAL MARITIME BOARD

The respondents were shown to have quoted rates exactly 

they appear in the tariff which contains detailed and com

rates and regulations The tariff was not on file anywhere 

could not be consulted by everyone All respondents rece

notices of changes and all reported their quotations from tim

time One line could not find out what another was doing with

consultation The rates used were the same as each other s 

werethe same as the tariff rates with one or two exceptions W

out the exchange of information they couldn t conceivably q

the same rates Even in the case of the exceptions the lines 

a uniform rate Apparently as respondent s counsel indicate

oral argument it would have been foolish to have waited B

approval sic before preparing and presumably using 

tariff

Three of the respondents advertisements covering about a

state For rates of freight and other information apply C

dian Pacific Railroad or Cunard Line or Furness With

Company giving the address and telephone number of e

Under this it says to apply to Any other Canadian Pa

Cunard or Furness Line office or agency It is a fair infere

that a shipper would not call each line for its own rates in resp

to such an advertisement but that a shipper could call anyon

the lines or their agents and obtain an applicable rate It w

have been very easy to rebut any such uniformity of rates 

bringing in bills of lading showing variations but this was 

done

Such uniformity of action is consistent only with some so

previous understanding that the carriers would conform to 

agreed course of action Independent activity without any un

standing normally would produce differing and non conform

actions by each carrier The result was that transportation r

were fixed and regulated

No evidence of any such agreement in the form of a true c

or of any understanding in the form of a memorandum was 

filed with the Board as required by Sec 15 The legislative his

of the Act makes it clear that Congress was interested in 

understandings tacit agreements and gentlemen s agreements 

tween common carriers by water such as those involved h

The Alexander Report House Doc 805 63d Congo 1914 

vol 4 pp 295 304 416 418 The purpose of Sec 15 was to p

in Board custody information and proofs which the Board c

review and analyze and make up its mind about whether the 

6 F M
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 209

quirements ofthe second paragraph of Sec 15 werebeing followed

In this case the respondents have not put in Board hands evidence

of understandings to which they are a party or to which they con

form The complaint of a violation of the requirement in Sec 15

as to filing agreements relating to fixing or regulating transpor

tation rates has been proven See Wharfage Charges and Prac

tices at Boston Mass 2 U S M C 245 1940

The basis of the second major complaint is directed at the regu

lation of the number and character of sailings between ports and

at cooperative working agreements The result of the schedules

observed by six of the respondents is a coordinated westbound

service between the United Kingdom and United States Great

Lakes ports during the 1957 and 1958 navigation seasons Two

groups ofsailing arrangements are shown Those between Anchor

Bristol City and Head Lord lines covering the ports of Glasgow

Bristol City Avonmouth and Liverpool during 1958 and those

between Canadian Pacific Cunard and Furness departing from

London during 1957 and 1958 destined to United States Great

Lakes ports

The significance of the notices described herein is not that they

involve joint advertising which by itself does not justify finding

that the action was taken pursuant to agreement Los Angeles

By Products Co et al v Barber SS Lines Co Inc et al 2 U S M C

106 108 1939 The significance is that the information con

tained in the notices requires cooperative arrangements to carry

out the commitments made to the public The commitments also

require activity going far beyond that which occurs simply as the

result of respect for the historic position of each line in a port

as far as the United Kingdom is concerned In the United States

there could be no such tacitly respected historic position in the

Great Lakes

The work involved in preparing the advertisements and sched

ules bespeaks mutual understandings among the participating lines

as to how ports should be allotted what schedules to print and

about the timing destination and other description of service to

United States ports The subsequent detailed alternation of de

partures and arrival of ships from the allotted ports in accordance

with the public notice the use of berths the loading of cargo and

the allocation of revenues and costs all require coordinated activity

which could only be accomplished by a policy ot cooperation fol

lowed by arrangements made at the managerial level among the

participating companies A highly sophisticated plan of opera

6 F M B
210 FEDERAL MARITIME BOARD

tions has resulted It is inconceivable that the administrative 

ganization connected with the use of so much money the m

ments of so many ships or of so much cargo and of so many p

between different carriers during a full season could be condu

without some explicit understandings as to cooperative activi

regulate sailings between the allotted ports and as to the d

bution of revenues and the sharing of expenses

There was evidence that the respondents passed ships from 

company to the other to enable each line to carry cargo to 

ports each served including United States Great Lakes p

There was no break in this pattern of exclusive and prefere

service from various ports The uniform characteristics o

service preclude any inference of independent operation Mu

agreement is essential to the effective accomplishment of the o

ations shown in this record When all of this coordinated ac

follows statements of a corporate official reading service in 

junction with others and the careful coordination require

avoid treading on others toes is considered the existence ofa

ments is inesGapable

No evidence of the required agreements in the form of 

copies or memorandums describing these undertakings 

ever filed with the Board pursuant to Sec 15 The complai

a violation of the requirement in Sec 15 as to the filing of a

ments relating to the allotment of ports the restriction or reg

tion of the number and character of sailings between ports a

exclusive preferential or cooperative working arrangements 

likewise been proven

The final charge of violations was that the proposed agreem

F M B 8400 and 8440 are not full agreements between the pa

therefore they do not qualify for approval A larger patte

operations which restricts or destroys competition is cha

Since we are not revising the earlier report disapproving the 

posed agreements no review of these charges is undertaken

Other than the inferences of conspiracy sought to be d

from the route and port call pattern of the respondents no p

of conspiratorial actions against the complainants was produ

More than this is needed and such complaint is found to be 

proven

The defense was interposed that respondent Anchor was n

common carrier by water Generally Bristol City s

1

and He

1 Bristol City is not a common carrier all to the M V Urania which was identified 

Head Line ship using Head Line Bills of Lading Ex 35

6 F M
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 211

Lord s common carrier status as regards this joint undertaking is

not in issue The other lines are also concededly common carriers

by water The defense is based solely on the assertion that An

chor s advertisements did not show them to be common carriers by

water but rather loading brokers and a statement by the confer

ence secretary as a witness that Anchor was not considered a

common carrier The advertisements however did not indicate

the status of Anchor as a

loading broker until after the complaint

was filed Anchor stated in its handbill issued to the public that

cargo would be subject to the Company s usual form of Wharfin

ger sreceipt and or bill of lading This referred to its own bill

of lading This is what it told to prospective shippers Anchor

is also signatory to the proposed conference agreement in which

it is described as a common carrier in the trade The conference

secretary advised the Board staff that several Shipowners who

have been engaged in the Liner trade between the United Kingdom

and the United States of America for over 50 years have re

cently each inaugurated independent Liner service direct from

United Kingdom ports to the ports on the U S A Great Lakes

In October 1957 when this was written there was no indication

that Anchor was anything other than a common carrier In none

ofthe following correspondence relating to revisions in the agree

ment prior to Board approval is thereany indication thatAnchor s

status had changed In correspondence to shippers under its own

letterhead Anchor enclosed our sailing card and referred to de

tails of our sailings for the 1958 season and quotes its own rates

All of the lines including Anchor which are signatories to the

proposed conference agreement as participating carriers use the

same name as they used in the advertisements and notices without

change or qualification

In the handbill subscribed to by all of the 8 respondents in

volved in this proceeding reference is made to the fact that the

undernoted lines will each operate regular westbound services

from their customary berth ports in the United Kingdom and Eire

direct to United States Great Lakes ports Anchor is referred

to as a line with no other qualification to distinguish its status

from that ofother subscribers

In AqTeement No 7620 2 U S M C 749 1945 the Kerr Steam

ship Co sought to be considered as a proper party to a conference

agreement as a common carrier by water Kerr was excluded

however as not being a common carrier by water but an agent

Agency status was established because Kerr had not owned any

6 F M B

732 047 0 64 15
212 FEDERAL MARITIME BOARD

vessels since 1936 operated only as a berth owner Le 

contacts with and enjoyed the good will of shippers in the tra

and as a result of its ability to attract business acted as loa

brokers for ships belonging to others Kerr signed dock rec

and bills of lading as agent for the ship owners Kerr adver

itself as loading brokers and general agent Kerr had 

tailed agreement with the Silver Line Ltd and Lief Hoegh 

AjS of Oslo providing for the furnishing of cargo the us

other vessels and the division ofgross freights

The opposite status was found in Agreements No 6210 621

6210 B 6210 C and 6105 2 U S M C 166 1939 where the 

solidated Olympic Line as a conference member used the ship

J ames Griffith Sons Inc and other ship owners Consolid

Olympic issued its own bill of lading as agents for the car

The Commission reported this company handles the cargo 

start to finish assumes all the responsibility and obligations 

common carrier and considers itself a common carrier 

Commission stated that the contract between Consolidated 

the various vessel owners and also the bill of lading form use

Consolidated are confusing They are also inconsistent with 

contentions of the parties that Consolidated is a common ca

We conclude from all the facts that Consolidated is a common 

riel To distinguish the Kerr case and the Consolidated Oly

Line case the Commission found that Consolidated unde

toward shippers the obligations of common carriage and 

therefore a carrier but Kerr apparently did not

Anchor appears to have held itself out so far as the pub

concerned as a common carrier Itadvertised its schedule fo

entire season for the 4 ships which were passed between co

nies Its advertisements and shipping publication informatio

refer to Anchor Line service While the evidence is not en

clear the preponderance of unrepudiated evidence shows tha

chor wanted to be known as the carrier of shippers goods 

dered to it

No other evidence was introduced showing that Anchor wa

a common carrier by water other than the loading broker des

tion in its notices after the end of April 1958 and the stateme

the conference secretary The respondent merely sought to 

claimed shortcomings in complainant s proofs to show absen

proof of such status On the proofs offered we are convinced 

Anchor is a common carrier by water and was required to fi

agreements along with the other respondents

6 F M 
ORANJE LINE ET AL v ANCHOR LINE LTD ET AL 213

Respondent Ellerman s Wilson Line Ltd was not shown to have

offered service to the United States Great Lakes ports nor to have

participated in any of the transportation rate fixing or joint serv

ices Accordingly this respondent has not been shown to have

violated Sec 15 Respondent Manchester Liners Ltd operated to

Cleveland Detroit Milwaukee and Chicago and quoted the pro

posed tariff rates but does not appear to have participated in any

of the joint services through an exchange of ships or cooperative

sailing arrangements Accordingly thi respondent has not been

shown to have violated Sec 15 insofar as it relates to agreements

for allotting ports restricting or regulating sailings and providing

for exclusive preferential or cooperative arrangements Of the

remaining respondents all have violated Sec 15 insofar as it re

quires the filing of agreements relating to fixing or regulating

transportation rates Anchor Line Ltd The Bristol City Line of

Steamships Ltd Canadian Pacific Railway Company The Cunard

Steamship Co Ltd Furness Withy Co Limited and The Ulster

Steamship Company Ltd Head Line Lord Line have violated

Sec 15 insofar as it requires filing of agreements relating to the

allotment of ports the restriction or regulation of the number and

character of sailings between ports and to cooperative working

arrangements

The precise dates when any of the agreements complained of

were made is not clear from the record As regards agreements

regulating transportation rates it appears that full agreement on

the use of the tariff must have been reached by April 1 in view

of the date on the cover its prior distribution and the fact that all

of the carriers letters quoting identical rates were after such

time the first such letter being dated April 10 1958 We establish

April 1 1958 as the date when the common carriers by water be

gan to violate the requirement as to the immediate filing of agree

ments regulating transportation rates

The Anchor Bristol City Head Lord Line agreement about de

parture and port calls seems to have become final at the latest by

February 3 1958 when the Bristol City Line advertised departures

under the arrangement in Lloyd s Loading List Anchor and Head

Lord advertised in the Journal of Commerce February 22 1958

with reference to the ships involved in the arrangement The first

closing date for any cargo was March 27 1958 which would allow

time to arrange the use of the four ships involved We establish

February 3 1958 as the date when the aforesaid common carriers

6 F MB
214 FEDERAL MARITIME BOARD

by water began to violate the requirement as to the immed

filing of agreements relating to the llotment of ports the reg

tion ofsailings and to cooperative arrangements

The Canadian Pacific Cunard Furness agreement about de

tures and port calls must have become final at the latest by F

ruary 18 1957 when the Liverpool Journal of Commerce car

notices both by Furness separately and by Canadian Pac

Cunard Furness jointly Joint notices of the service in ques

herein appear in several publications thereafter Existence o

understandings is confirmed by the Furness report to its st

holders Continuation of the service for the 1958 season is 

tained in a joint announcement dated March 1 1958 subscr

by these carriers among others We establish February 18 1

as the date when the aforesaid common carriers by water bega

violate the requirement as to the immediate filing of agreem

relating to the allotment of ports the regulation of sailings an

cooperative arrangements

The aforesaid respondents which have violated Sec 15 are li

to penalties as provided in the last paragraph of Sec 15 

facts and findings herein shall be referred to the Departmen

Justice for appropriate action

6 F M 
FEDERAL MARITIME BOARD

No 849

AGREEMENT AND PRACTICES PERTAINING TO FREIGHTING AGREE

MENT GULF AND SOUTH ATLANTIC HAVANA STEAMSHIP CON

FERENCE AGREEMENT No 4188

No 851

ApPROVAL OF ARTICLE 1 OF FREIGHTING AGRE EMENT G 13 OF

GULF AND SOUTH ATLANTIC HAVANA STEAMSHIP CONFEHENCE

AGREEMENT No 4188

No 854

SWIFT COMPANY AND SWIFT COMPANY PACKERS

v

GULF AND SOUTH ATLANTIC HAVANA STEAMSHIP CONFERENCE

ET AL

Decided February 2 1961

Provision of freighting agreement proposed by the members of the Gulf and

South Atlantic Havana Steamship Conference to cover cargo originating

at any inland port or place and moving via or exported by way of any

river or inland waterway terminating at touching or flowing through

any Gulf or South Atlantic port of the United States found to constitute

a modification of an agreement by a common carrier by water with

another such carrier under Sec 15 of the Shipping Act 191G and must

be filed with the Board

Provision of freighting agreement proposed by the members of the Gulf and

South Atlantic Havana Steamship Conference to cover cargo originating

at any inland port or place and moving via or exported by way of any

river or inland waterway terminating at touching or flowing through

215

6 F M B
216 FEDERAL MARITIME BOARD

any Gulf or South Atlantic port of the United States found to be 

justly discriminatory or unfair as between shippers and ports an

operate to the detriment of the commerce of the United States u

Sec 15 of the Shipping Act 1916

Common carriers by water found to have subjected particular persons l

ties and descriptions of traffic to undue or unreasonable prejudic

disadvantage by preventing 1 shippers from using economical t

portation alternatives 2 river port cities from obtaining cargo 

3 traffic inland by barge transportation in violation of Sec 1

the Shipping Act 1916

Common carriers by water found to have demanded charged and collec

rate which is unjustly discriminatory between shippers and port

compelling shippers to pay rates based on shipments from ports serve

respondents instead of rates from ports and by transportation me

chosen by shippers in violation of Sec 17 of the Shipping Act 191

Gulf and South Atlantic Havana Steamship Conference s attempt to e

dual rate system to cargo shipped from inland ports not served by 

ference members found to be unlawful under Sec 14 Third of the 

ping Act 1916 because it was a not in effect on May 19 1958 

b was for the purpose of stifling the competition of indepe

carriers

Swift Co and Swift and Company Packers complainants entitled u

Sec 22 of the Shipping Act 1916 to full reparation for the i

caused by the violation of said Act equal to the actual damages t

complainant during the period from January 1 1959 through the 

of business on January 21 1959

Walter Carroll Esq and Edward S Bagley Esq for Comp

Naviera Cubamar S A Lykes Bros Steamship Co Inc Nav

Garcia S A Standard Fruit and Steamship Company Un

Fruit Company and West India Fruit and Steamship Co 

members of the Gulf and South Atlantic Havana Steamship 

ference Respondents in Nos 849 and 851

ClaTke Munn Jr Esq George F Galland Esq and Robe

Khcoasch Esq for Swift C mpany Swift Company Pac

and vVhite Gold Barge Line Corporation John S Burchmore E

Robert N Burchmore Esq and Charles B Myers Esq for 

National Industrial Traffic League B1 axton B Carr and Wil

L Kohler Esq for The American Viaterways Operators 

G E Franzen for The Chicago Association of Commerce and 

dustry C M Langham and Ja1nes W Lee for Port of Palm B

District F G Robinson for Board of Trustees of the Galve

Vharves G B Pe1TY for Houston Port Bureau Inc Dav

Green for Florida East Coast Railway C B C01 ey for Seab

Air Line Railroad Company E C Hicks J1 for Atlantic C

Line Railroad Company J E Power for Louisville and Nash

Railroad Company and D F McCullough for Gulf Mobile 

6 F M
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 217

Ohio Railroad Co O J Williford Jr for Illinois Central Railroad

and H W Talmadge for Southern Railway System and James W

Wrape for Frank E Aiple Interveners in Nos 849 and 851

Clarke Munn Jr Esq George F Galland Esq and Robert N

Kharasch Esq for Swift Company and Swift Co Packers

Complainants in No 854

Walter Carroll Esq for Gulf and South Atlantic Havana Steam

ship Conference Compania Naviera Cubamar S A Lykes Bros

Steamship Co Inc Naviera Garcia S A Standard Fruit and

Steamship Co United Fruit Co West India Fruit and Steamship

Co Inc and Daniel E Taylor and Odell Kominers Esq and J

Alton Boyer Esq for West India Fruit and Steamship Co Re

spondents in No 854

H L Shaffer for Dubuque Packing Company W L Fidler for

Hygrade Food Products Corp H C Brockel for Great Lakes

Harbors Association and for Board of Harbor Commissioners

City of Mil aukee Interveners in Nos 849 851 and 854

Robert E Mitchell Edward Aptaker and Edward Schmeltzer

Esqs Public Counsel

REPORT OF THE BOARD

RALPH E WILSON Chairman THOMAS E STAKEM Vice

Chairman SIGFRID B UNANDER Member

BY THE BOARD

1 PROCEEDINGS

The Board upon its own motion as authorized by Sec 22 of the

Shipping Act 1916 as amended Act on January 12 1959

entered into an investigation and hearing to determine whether a

provision Article 1 b in the 1959 Freighting Agreement No

G 13 1959 Agreement adopted and submitted to shippers by

the Gulf and South Atlantic Havana Steamship Conference Con

ference 1 constitutes a new Sec 15 agreement and or 2

would be unjustly discriminatory unfair or operate to the detri

ment of the commerce of the United States within the meaning of

Sec 15 of the Shipping Act 1916 or would be in violation of

Sections 14 16 or 17 of said Act l Article 1 b provides

1 The aforesaid cargo and shipments covered by this

I

Order dated January 16 1959 entered in Docket No 849 on January 12 1959 24 F R

482 January 21 1959 as amended by order dated February 27 1959 entered on February 19

1959 24 F R 1662 March 5 1959

6 F MB
218 FEDERAL MARITIME BOARD

agreement shall include all cargo and shipments which the ship

may ship or cause to be shipped directly or indirectly as follo

b That portion of the carriage between Gulf and So

Atlantic ports of the United States and the Cuban ports her

above described in respect of all cargo originating at or from 

inland port or place and moving via or exported by way of 

river or inland waterway terminating at touching or flow

through any Gulf or South Atlantic port of the United Stat

Compania Naviera Cubamar S A Lykes Bros Steamship 

Inc Naviera Garcia S A Ward Garcia Standard Fruit 

Steamship Company United Fruit Co and West India Fruit 

Steamship Co Inc West India parties to the agreement 

acting jointly as the Conference were all made respondents in 

proceeding The Board s order dated January 16 1959 as ame

ed February 27 1959 ordered them to cease and desist f

effectuating the quoted provision On April 3 1959 by furt

order the Board upon its own motion entered upon another 

vestigation and hearing to determine whether 1 the whole 

Article 1 of the 1959 Freighting Agreement No G 13 co

tutes a new agreement and or would be in violation of 

tions 14 16 and 17 of said Act or should be appro

pursuant to Sec 15 of said Act 2

Thereafter on May 20 1

Swift and Co and Swift Co Packers Swift shippers of 

and meat products to Cuba filed a complaint 3

asking 1 

reparation 2 that its complaint be consolidated with the 

investigations and 3 for other relief as the result of damage 

fered from the enforcement by the Conference of Article 1 

against Swift The two investigations and the complaint w

consolidated for hearing by the Examiner s notice dated June 

1959

The proceedings were heard by an Examiner who in a deci

served on March 3 1960 recommended that the Board find

1 that the 1958 Freighting Agreement G 12 1958 Ag

ment did not apply to shipments from St Louis to Havana

2 that the Conference and its members have violated sectio

of the Shipping Act 1916 a by their attempted interpreta

of the 1958 Freighting Agreement to contain a

routing restric

precluding direct shipment from St Louis and b by their ad

2 Order dated April 15 1959 entered in Docket No 851 on April 3 1959 24 FR 3058 

21 1959

3 Docket No 854

6 F M
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 219

tion of the 1959 Freighting Agreement both without Board

approval

3 that Article 1 of the 1959 Freighting Agreement G 13 is a

new section 15 agreement and or a modificatton of the organic

Conference Agreement No 4188 Conference Agreement and

the 1958 Freighting Agreement

4 that the shipper s freighting agreements in question past and

proposed insofar as they are applied to impose a

routing restric

tion on shipments from inland ports which the Conference lines

do not serve results a in detriment to the commerce of the

United States as well as unjust discrimination against such ports

and shippers therefrom in contravention of section 15 of the

Shipping Act 1916 and b in undue prejudice and unjust dis

crimination against such ports and shippers in violation of sections

16 and 17 of said Act

5 that the attempt by the Conference to extend the dual rate

system to inland ports not served by its members was made for

the purpose of stifling non conference competition in violation of

section 14 Third Shipping Act 1916

6 that complainants were damaged in the amount of the dif

ference between the charges paid at non contract rates on ship

ments made between January 1 1959 and January 12 1959 and

those which would have accrued at the contract rates contempo

raneously in effect thereby and they are entitled to retaration on

such shipments with interest All other claims for reparation

were denied Reparation statement should be filed in accordance

with Rule 15 of Rules of Practice and Procedure

Exceptions to the recommended decision and replies thereto

werefiled and oral argument was heard Exceptions and proposed

findings not discussed in this report nor refl cted in our findings

have been considered and found not justified

II FACTS

Since 1935 the Conference has existed under F M B Agreement

No 4188 approved in its original form on April 24 1935 pursuant

to Sec 15 of the Shipping Act 1916 The Agreement authorized

a dual rate contractarrangement whereby tariffs were established

at two levels the lower of which was charged to shippers who

agree to ship cargoes on members ships only Others paid the

higher rates Swift had been a party to such a contract for over

30 years Beginning June 25 1958 a

company known as White

6 F MB
220 FEDERAL MARITIME BOARD

Gold Barge Line Corporation which is not a Conference me

made five trips carrying full barge loads of lard from St 

Mo to Havana Cuba and Swift was the shipper on th

voyag Sinc e September 1958 the barges have not operat

cause of a Cuban government decree prohibiting the use 

barges for lard imports The Conference by letter dated J

1958 told Swift it considered Swift s shipments by such ba

violation of its agreement to ship on Conference members 

because St Louis was a Gulf and South Atlantic port cove

the agreement to ship from such ports exclusively on such 

This interpretation of the agreement embodied in a revis

the 1959 Agreement was the basis for initiating Docket N

on the ground that the revision contained in paragraph 

Article 1 of the 1959 Agreement was really a new agreeme

not an interpretation of what had existed all along If th

shown to be the case the revision would have to be filed 

Sec 15 Notwithstanding its argument that the existing 

ment impliedly covered the port ofSt Louis the Conference 

after filed the revised 1959 agreement for approval by the 

presumably as a modification of the Conference Agreement 

such filing Docket No 851 was initiated to determine if the 

Article 1 not just the interpretation in paragraph b th

was a new agreement which must be approved pursuant to S

ofthe Act

Prior to the barge shipments Swift had its lard transpor

Havana Cuba from West Palm Beach Fla in freight c

respondent West India sfreight carferry ships Before the 

graph was added to the 1959 Agreement but after Swift ch

over to the use of barges the Conference and its membe

contended Article 1 meant that the transportation of lard on 

es from St LouiR to Havana violated the freighting agreem

they interpreted it by a failure to offer during the period Ja

1 1958 to December 31 1958 all cargo which shipper may 

or may cause to be shipped directly or indirectly from Gu

South Atlantic ports of the United States to the Port of Ha

Cqba and claimed damages under Article 7 for failure to 

As poted above a

cargo shipment from St Louis to Havana 

stitutes a shipment from a Gulf port according to a Conf

interpretation ofArticle 1 The claim based on this interpre

was arbitrated and Swift lost On October 28 1958 Swift n

the Conference it would not extend the 1958 Agreement to 

On December 31 1958 Swift refused to sign the 1959 Agre

6 F 
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 221

submitted to it on December 8 1958 It would not sign until the

paragraph b which specifically covered shipments from St

Louis had been removed and if removed unless the interpretation

of Article 1 giving it such effect was revoked The Conference

refused both conditions The Board s order dated January 16

1959 as amended February 27 1959 to cease and desist from

effectuating the new provision of the 1959 Freighting Agreement

was served on the respondents January 20 1959 and was published

in the Federal Register issue of January 21 1959 The Conference

on March 10 1959 notified all of its contract shippers but not

Swift that it would comply with the order of the Board Swift

was notified on April 27 1959 On May 8 1959 Swift signed the

1959 Agreement effective May 11 1959 Between January 1 1959

and May 11 1959 Swift was charged and paid the non contract

rates on lard and paid about 28 000 more than contract rates

III DISCUSSION

The Examiner concluded that the meaning of the 1958 Agree

ment was in issue and that its interpretation by the Board was

not precluded by the arbitrators decision Exception is taken to

this conclusion

The meaning of the 1958 Agreement is relevant insofar as it

also establishes the meaning of the agreement between common

carriers by water or other persons subject to the Act which must

be filed pursuant to Sec 15 i e the Conference Agreement Only

conference agreements modifications or cancellations approved by

the Board are lawful under Sec 15 To the extent any interpre

tation ofthe 1958 Agreement extends its scope beyond that allowed

by the authorizing Conference Agreement heretofore filed and ap

proved by the Board the 1958 Agreement must modify the Con

ference Agreement and thus make it a new Sec 15 agreement

Such modified agreement is unlawful until it is filed and the Board

approves it Therefore the meaning of the 1958 Agreement is in

issue under Docket Nos 849 and 851 since the respondents are in

effect saying that the arbitrators decision is more than just a find

ing that Swift violated the Freighting Agreement because the

arbitrators must first find the existence of an obligation to be

violated Thus it is also a final opinion that the 1958 Agreement

is not amodification of the Conference Agreement which we have

already approved but an interpretation of what has existed all

along If the provision is a modification the arbitrators decision

6 F M B
222 FEDERAL MARITIME BOARD

is a final opinion that the arbitrators not the Board may ap

the provision and may go on to find it has been violated S

is quite clear that only the Board may approve agreeme

modifications Our responsibilities and the common carriers 

are not discharged by any other technique of administerin

15 hence the exception to this extent is not valid

Relying on the United States Arbitration Act 9 V S C 

respondents urge that the Board has no authority to pla

interpretation on the 1958 Agreement but must give fin

binding effect to the results of the arbitration between the 

frence and Swift Itis stated that the Arbitration Act pr

for fin lity of arbitration decisions of the very kind here 

sue NO authority is cited for this proposition We find n

vision of the Arbitration Act which expressly or impliedly 

any rule of law which expressly provides for such finality or 

our authority under the Act nor any court decision which 

that it does so by implication There is no provision in th

which does so either This part of the exception is invalid 

have an independent responsibility to determine the scope of

ments which we approve under Sec 15

The Examiner found the 1958 Agreement did not apply to 

shipped from St Louis Mo to Havana Cuba and outports 

India and the conference except to this The 1958 Agre

contains no provision naming St Louis see above but t

spo dents argue it reasonably may be interpreted to extend 

port because of the word indirectly as applied to cargo s

from Gulf and South Atlantic ports This it i argued 

that cargo originating inland and passing through the Gulf 

New Orleans as a Gulf port is covered Another aspect 

exception is that the shipper s obligation to use Conference 

is not depen ent on the origin of the cargo or mode of trans

tion to a Gulf port By passing through New Orleans a

automatically becomes cargo the Conference member shi

entitled to carry and should be offered to them for carrying 

apart from these considerations our reasons and conclusions 

below that such a provision whether by interpretation or 

press modification is a restriction on cargo routing cont

our decision in Contract Routing Restrictions 2 U S M 

1939 makes the issue of the applicability of Article 1 

1958 Agreement immaterial because the provision itself is 

and requires no interpretation Since the restriction is i

the Examiner correctly held the agreement did not apply to 

6 F 
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 223

ments from St Louis nor is it applicable to shipments through

New Orleans

To the extent that the Conference attempted before filing with

the Board to make the 1959 Agreement extend to St Louis by the

addition of an express provision as paragraph b in Article 1 of

the 1959 form of Agreement the Examiner found such provision

is a new agreement or modification of the Conference Agree

ment

The scope of any freighting agreement is necessarily limited by

the agreements between common carriers by water or other per

sons subject to the Act which are filed and approved as required

by the first sentence of Sec 15 of the Act The Agreement creat

ing the Gulf and South Atlantic Havana Steamship Conference

regulating its activities governs the 1958 and 1959 Agreements

in question and limits the scope of Conference authority The

1958 and 1959 Agreements do not name any port located on an

inland waterway or not located on the Atlantic or Gulf coast It

is argued that nevertheless the 1958 Agreement as interpreted

or as revised in 1959 implies that without naming the port it

covers the carriage of cargo originating at or from any inland

port in this case St Louis exported by way of any river flowing

through any Gulf port such as New Orleans ie the Mississippi

River The Conference Agreement names other ports however

such as Savannah Ga Port of Palm Beach Fla Tampa Fla

Panama City Fla and Pensacola Fla all South Atlantic ports

and New Orleans La Lake Charles La Orange Tex Beaumont

Tex Port Neches Tex Port Arthur Tex Galveston Tex and

Houston Tex all Gulf ports These ports are named in

Article 15 after the statement declaring the intention of the mem

bers to maint in service under this Agreement The Agreement

also names Havana Cuba and service to Cuban Mainland Out

ports namely Mariel and Matanzas and nothing herein

contained shall be construed to extend the provisions ofthis agree

ment to ports or territories other than as described herein

N one of the Conference members serves or has ships to serve St

Louis Mo The issue of calling St Louis aGulf port never arose

until White Gold began its tug and barge service We see no

escape in the light of the way the 1958 Agreement was drafted

and of the foregoing from the Examiner s conclusion that the

interpretation by the Conference is not an interpretation at all

but is in effect a fundamental modification of the scope of the

Conference Agreement and hence of its terms

6 F M B
224 FEDERAL MARITIME BOARD

Sec 15 requires every common carrier by water to file im

ately with tht Board a true copy or memorandum of such m

cation This was not done until February 26 1959 We fin

between July 10 1958 when the Conference first asserted its 

that shipments by barge from St Louis constituted a bre

the 1958 Agreement thus modifying the Conference Agree

and February 26 1959 when the Conference filed the revise

Agreement provisions with the Board and requested ap

thereof the respondent common carriers by water members 

Conference violated the provisions of Sec 15 of the Act by f

to file the modification of an agreement with another such c

fixing or regulating transportation rates giving or receivin

cial rates or special privileges or regulating the charac

freight traffic to be carried

West India and the Conference seek to avoid the filing re

ments of Sec 15 by citing paragraph 16 of the Conference A

ment authorizing dual rates for stabilization purposes an

absence of any provision containing any limitation upon the 

ference s contract rate authority in terms of origin of the 

mode of transportation to ports served by the Conference 

any other terms The Examiner found and we have agree

the Gulf and South Atlantic ports and Havana Cuba 

provision in Article 1 coupled with the meaning of such po

Article 15 and the statement in the opening clause of the C

ence Agreement that nothin herein contained shall be con

to extend the provisions of this Agreement to ports or terr

otherthan as described herein constitutes such a limitation

Exception is taken to the Examiner s disregard of the ca

Hymen IMalatzky d b a Himala International v America

port Lines 3 F M B 232 1950 and Isbrandtsen Co In

North Atlantic Continental Freight Conference et al 3 F M 

1950 These cases involved no issue as to the port cover

the Conference Agreements in question Which is the iss

volved here but attacked the dual rate system The dua

system is not challenged here The cases are not authority f

recognizable issue in this case and were properly disregarde

Further West India claims the right to receive Swift s 

pursuant to its contract on the ground that the cargo i

hauled to New Orleans by a river tug and then transferre

deep sea tug thus making the cargo a shipment from a Gu

just as though it were sent there by locomotive and then 

shipped to the ocean vessel The more correct analogy is t

6 F 
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 225

the freight train which changes or adds locomotives at the foot of

a steep grade No cargo transfer is involved There is a contin

uous movement in the same barge and neither the change from

riverto ocean tugs nor even a temporary halt in the barge move

ment converts the cargo to a shipment from an ocean port

The Examiner found that the modification of the Conference

Agreement constituted arouting restriction which was detrimental

to the commerce of the United States and unjustly discriminatory

as between shippers or ports and subject to disapproval by the

Board pursuant to Sec 15 ofthe Act He also found the modifica

tion 1 subjected particular persons ie shippers and localities

i e ports to undue prejudice or disadvantage in violation of Sec

16 second paragraph First and 2 involved the demand charge

or collection of a rate fare or charge which is unjustly discrim

inatory between shippers or ports in violation of Sec 17 of the

Act West India the Conference and an intervener Board of

Trustees of the Galveston Wharves except to this and to the fact

that the Examiner did not dispose of West India s contentions

touching on the subject

The basis for the Examiner s conclusion was that the restriction

by the respondent common carriers by water acting together pre

vented 1 shippers from using the IVlississippi River on which

large amounts of public money have been spent for navigation and

harbor improvements 2 river port cities from obtaining cal go

for shipment therefrom and 3 traffic in lard by barge transpor

tation from being used by shippers when it has certain economic

advantages The restrictions tended to compel shippers to forego

these advantages in favor of using conference line ships from the

ports they served The facts support such conclusions The com

pulsion exists because in the words of a respondent s counsel

with respect to this other traffic other commodities Swift ships

to Cuba and an occasional tank car of lard if the Conference

position is sustained Swift would be reduced to the choice of

shipping by Conference ships at non contract rates vVe

think this choice involves an undue disadvantage to shippers Since

the shipper can t sell nlore lard if its sale price includes the higher

freight rates the shipper either complies with Conference terms Qr

gets out of this line of business Counsel says the result of the

barge service alternative is that Swift will be in a position almost

immediately to monopolize the Cuban lard market Assuming

relevance to respondent s monopoly charge the record did not bear

out these fears Swift once enjoyed 18o to 20 of the trade it

6 F M B
2 6

FEDERAL MARITIME BOARD

now has 12ro to 14 Barge traffic should not be prejudiced 

more evidence of detriment to commerce is shown

The other contentions and considerations urged by respon

to prove detriment to commerce are 1 the havoc barge c

tition would cause in the existing stable business situatio

chaos in the Cuban trade through lack of rate stability pr

ably through lowered freight rates 2 the damage to West 

whose services are needed by Cubans to market their fruit

vegetables S lack of appearance by port interests in supp

Swift 4 support by Gulf port cities and Palm Beach Po

trict for the Conference 5 unwillingness of the barge ind

to commit equipment to the Cuba trade 6 damage to Vest 

from l0ss of the lard trade 7 threat to other Conference ca

from the expansion of barge use to other commodities 8 

sion of traffic from rail carriers 9 advantages of rail an

ferry over through barge movement and 10 encouragem

the use of barges subverts the national defense interest in h

a specialized fleet of self propelled ships suitable for use in 

porting tanks The contentions that barges will be damag

the business of respondents but that the service provided 

spondents is better anyway exemplifies the contradictions inv

in considering either one as a dominating consideration in a 

of detriments to the commerce of the United States The int

and needs ofshippers in foreign commerce should dominate 

competing methods and new technique of water transpor

are involved An arrangement would seem to operate t

detriment of the commerce of the United States or be unf

between shippers and exporters from the United States and 

foreign competitors which prevents the former from having 

choice among competing methods of transportation for co

vantages Anything which impedes such free choice amon

stantly changing alternatives provided by technical chang

traffic and transportation methods is a detriment to comme

the long run Tl1ere is no inherently more advantageous m

of transportation such as common carriage over private ca

or the use of self propelled ships that must be protected re

less of the context of any situation in the ame of avoiding 

ment to the commerce of the United States None of the c

erations listed by respondents take the shipper s freedom of 

into account all are designed to protect the status quo or th

ticular interests of the respondents hence they are of little w

in countering all the conflicting carrier shipper and port in

6 F 
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 227

considerations the Examiner used as the basis for his findings

about prejudice and discrimination against ports shippers and

traffic

The authority of the Conference to institute the contract rate

system in Agreement No 4188 is not in issue Rather the just

ness and fairness of aparticular contractobligation in the Freight

ing Agreements as applied to Swift and the use of barges the

discriminatory or prej udicial aspects of such obligation and the

effect on the commerce of the United States of such obligation

when it limits a shipper s choice of transportation alternatives

such as through barge movements from St Louis are the prin

cipal issues No overriding consideration which would resolve the

issues in favor of the proposed 1959 Agreement obligation con

sistently with statutory standards has been shown

The Examiner found that the contract obligation in issue re

stricted a shipper s choice to the point where it was not consistent

with the Maritime Commission s

interpretation of Sec 15 of the

Act in the Contract Routing Restrictions case supra There the

contract obligation sought to be imposed on shippers required

contract signers to offer respondent conference members all cargo

and shipments to certain European ports which shipments move

via any United States or Canadian North Atlantic port or water

way Great Lakes River St Lawrence and other waters tributary

to North Atlantic included If a shipment be made in violation

ofthe contract the carriers may terminate the contract and charge

the higher non contract rates This obligation is comparable to

the one in question In this proceeding shipments are to Havana

Cuba instead of to European ports Shipments subject to the

contract are those moving via Gulf ports instead of North Atlantic

ports which are qualified to include those moving by way of any

river or inland waterway such as the Mississippi instead of

any waterway such as the Great Lakes and River St

Lawrence The only arguable difference is whether the change

from a river tug to an ocean tug at the Gulf port of New Orleans

or the non use of ocean going ships up to St Louis which was not

done in the Great Lakes St Lawrence transit makes any differ

ence and whetherthe use of ocean going deep draft self propelled

ships to Montreal makes a difference As noted above we do not

consider that the change of tugs or the use of barges instead of

deep draft ships alters the character of the transportation as far

as the shipper and his shipment are concerned It is stated that

shoal draft inland barge transportation and deep sea movement

6 F M B

732 047 0 64 16
228 FEDERAL MARITIME BOARD

are not the same thing in fact They are different of course 

the difference does not provide any distinction relevant to 

existence of shipper and port discrimination under Sec 15 o

Act as interpreted in the Contract Routing case Inference

sought to be drawn from the fact that 1 Great Lakes port

accessible to ocean shipping while St Louis is not 2 there 

other discriminatory practices involved in the Contract Ro

case such as discriminatory shipper contracts and 3 ship

testified against the restriction in the Cont1act Routing 

supra but here almost the reverse is true Such facts ar

controlling since we find the contract obligation which restri

shipper s choice regardless of these background factors ha

effect of eliminating St Louis as a port for ocean cargoes w

can be put on barges there The obligation is thus unjustly 

criminatory against the port of St Louis and unfair to pote

shippers therefromwho have cargo suited to barge transporta

The same facts insofar as they create a discrimination ag

shippers and ports also involve the demand charge or collecti

a rate which is unjustly in violation of Sec 17 by compelling 

pers to pay rates based on shipments from the ports served b

respondent common carriers instead of rates from ports an

transportation methods chosen by shippers

Public interest in the stability of rates is also urged as a 

for upholding the contract obligation assuming it will pro

such stability The same argument for stability was prese

the Contract Routing case supra and found not to be contro

there We have never held stability of rates to be an end in i

Itis asignificant factor in upholding the dual rate system bu

a justification for otherwise discriminatory or unfair practice

for other illegal activity The dual rate system remains i

without the provision in question unless in a factual contex

system is also found to stifle competition in violation of Se

Third of the Act This is the basis of the next exception

The examiner concluded that the attempt through the 1958 

1959 Agreements to extend the dual rate system to cargo sh

from inland ports not served by Conference members was 

for the purpose of stifling non conference competition The 

aminer made precise findings that the present system unde

proposed modification was applied for the purpose of stifling 

petition Federal Mariti1ne Boa1 d v Isbrandtsen Co 356 

481 1958 The Isbrandtsen case holds that Sec 14 Third st

down dual rate systems where they are used as predatory de

6 F M
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 229

The Examiner found that the modifying contract provision ex

tending the dual rate system to St Louis was not in use and not

filed with the Board until February 27 1959 and thus was not

made lawful by Congress in spite of the I b1andtsen case The

interpretation embodied in the written modification was first as

serted in a letter to Swift from the Conference dated July 10

1958 Public Law 85 626 74 Stat 253 46 V S C 812 amended

Sec 14 to validate notwithstanding the Isb1 andtsen case any dual

rate contract arrangement in use by Conference members on

May 19 1958 This Act is in effect until June 30 1961 P L 86

542 74 Stat 253 Even assuming the agreement could be in use

without Board approval it does not meet the test of P L 85 626

We don tthink arguments unsupported by any evidence as to the

meaning of the Conference Agreement prior to July 10 1958 con

stitute a dual rate arrangement in use by Conference members

While it might not be essential to pass on respondents several

exceptions as to the Examiner s findings with regard to the applic

ability of Sec 14 of the Act because we have held that our inter

pretation of Sec 15 of the Act as applied to the facts in the Con

tract Routing Restrictions case supra is equally applicable to

the facts in this case making the restriction in question invalid we

do so in fulfillment of our original order in Dockets 849 and 851

raising this issue To the finding that the extension of the dual

rate system to inland ports not served by members was a preda

tory device made to stifle competition in violation Sec 14 Third

respondents make the following exceptions 1 a dual rate provi

sion was in use on lVlay 19 1958 having been a part of the Con

ference Contract at least since 1935 and is thus protected by the

amendment of Sec 14 contained in P L 85 626 supra and 2

that the Isb1 andtsen case supl a interpretation of Sec 14 applies

only to dual rate obligations which stifle independent non confer

ence common carrier or berth operations This dual rate provi

sion covering cargo originating at an inland port and moving by

way of a river flowing through a Gulf port was not in effect until

the respondents asserted it for the first time July 10 1958 The

exception under 1 is not well taken for this reason As to the

second exception Isb1 andtsen the plaintiff was an independent

non conference common carrier but the language of the decision

is nowhere limited to such carriers as suggested by the respondent

in stating that the decision was concerned only with stifling com

petition by such carriers Justice Brennan said The Congress in

S 14 has flatly prohi bited practices of conferences which have the

6 F MB
230 FEDERAL MARITIME BOARD

effect of stifling the competition of independent carriers 

is no further qualification in the decision such as common ca

or berth operations The sole qualification is found in the 

independent We take this to mean any carrier not aconfe

member Swift s contract carrier White Gold meets 

description

We find the present case indistinguishable for any signi

reason or circumstance from the Isbrandtsen case The Isb

sen case concerned inbound cargoes from the Far East whil

one concerns outbound cargoes to Cuba No provision of th

or the Supreme Court s discussion of the Isbrandtsen case m

the direction or origin of cargoes a significant factor in inte

ing the law The exception under 2 is not well taken eithe

we agree that the proposed contract violates Sec 14 Third o

Act

Swift West India and the Conference except to the awa

reparations Swift objects to the limited period from Janu

to January 12 West Indies objects to basing the measure o

arations on the difference between the non contract rates an

contract rates applicable if Swift had been given a contrac

the Conference objects to the conclusion that Swift was dam

by the 1958 or by the 1959 Agreements and to the asses

against them during all periods of non conference rates when 

werenot signatory to a Conferenc contract

Sec 22 provides that the Board may direct the payment 

before a day named of full reparation to the complainant fo

injury caused by such violation ie a violation of the Act 

the complainant proves Swift has proven a violation and 

titled to reparation Our rule on the proper measure is set 

as follows in Eden Mining Co v Bluefields Fruit S S C

V S S B 41 1922wherein the Board rejected as a measur

difference between the freight actually paid and the sum 

would have been paid had the complainants been given a dis

as were contract shippers

It cannot be inferred from the language used in Sec 22 

compensation for other than the actual damage incurred is 

granted Such damage is payable only where it results 

discrimination against the complainant Overcharges and 

criininations have quite differen consequences as far as re

tion is concerned A different measure of recovery applies w

the shipper has paid the applicable rate non contract and 

upon the discrimination caused by other shippers having t

6 F 
SWIFT CO ET AL v GULF AND SOUTH ATL HAVANA CONF 231

less or by being unjustly refused the contract rate The Examiner

concluded that there was no discrimination because Swift could

not produce any documentary evidence which would show its

comparative costs Discrimination depends on what the res

pondents do not on loss by the complainant even assuming the in

correct statement that evidence thereof must be documentary

Here enforcement ofthe respondent s proposed contract wasfound

by the Examiner to result in discrimination against shippers Le

Swift in contravention of Section 15 and a discrimination

against shippers in violation of sections 16 and 17 of said Act

We concur Accordingly Swift should be given the opportunity to

prove its damages in accordance with the rule in the Eden case

supra A further hearing on this is essential

Exception is taken to the period during which the right to rep

aration accrued The Examiner allowed the extra freight paid

from January 1 to January 12 1959 on the ground that on Janu

ary 12 Swift had prompt notice of the Board s order suspending

Article 1 b of the 1959 Agreement pursuant to Docket No 849

The evidence of notice consisted of a statement by a Swift official

during cross examination that he first learned that there had been

a cease and desist order from their Washington attorney in

early January In response to the question So that virtually at

the same time that it the order was issued you knew about it

The witness said Practically Further on light is shed on the

meaning of practically The witness was asked after a state

ment about the above testimony So I assume that you learned

about it say at the middle of January A Somewhere around

that date yes sir The Examiner held that on January 12 1959

the situation changed and Swift could have obtained the contract

rates with the assurance that the lawfulness of the agreement

would be duly determined by the Board Swift excepts on the

ground that it did not know whether the Conference intended to

obey the Board s January 12 order This is not material Assum

ing the Conference did not intend to obey the order the result at

the end of the Board s process would be to correct the effect of any

such disobedience as far as Swift was concerned As the Exam

iner found the lawfulness of the agreement would be determined

regardless of respondent s opinion or actions and our order would

be based on such determination Hence we are not willing to

extend the period of injury to May 11 1959 when the new con

tract was finally signed We do not agree however that the

period should end as the result of supposed knowledge of our order

6 F MB
232 FEDERAL MARITIME BOARD

based on an informal communication from its Washington a

ney Formal notice of the order was first given pursuant to 

Administrative Procedure Act by publication in the Federal 

ister The Board s order appeared in the January 21 1959 

24 F R 482 The order itself was dated January 16 1959 

January 21 1959 there could be no doubt of notice since noti

to be presumed after the official publication Before then S

was justified in refusing to sign after that it was not We 

that Swift is entitled to show damages from January 1 

through the close of business on January 21 1959 A fur

hearing to determine the amount of damages will be neces

The damages found to be due shall be paid within 30 days from 

date of our order fixing the respondents liability

Exception is taken to the fact that the Examiner disrega

our precedent in Himala International v American Export L

sup1 a that the granting of a lower contract rate when there 

no contract would be a discrimination in favor of the complai

by the carrier The case is not in point because the failur

grant a lower contract rate is not Swift s complaint Its 

plaint is based on the respondent s refusal to sign a valid cont

the various illegal consequences of such action and the discrim

tion against Swift caused by the refusal to grant contract r

because of its barge shipments

The final exception is to the failure ofthe Examiner to find 

the dual rate system as applied by the Conference was unlawf

a single carrier monopoly Since we have already held the 

posed contract obligation is an unauthorized routing restric

and not in effect on March 19 1958 pursuant to P L 85 626 

find it is not necessary to pass on this issue

The proceedings will be held open for further proceeding

determine the exact amount of the reparations found to be 

An appropriate order consonant with this report will be iss

The Respondents in Docket No 849 who have violated Se

ofthe Act are liable to penalties as provided by the last parag

thereof The facts and findings herein shall be referred to 

Department of Justice for appropriate action

6 F M
SWIFT CO ET AL v GULF AND SOUTH ATL HAV ANA CONF 233

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 2nd day of February 1961

No 849

AGREEMENT AND PRACTICES PERTAINING TO FREIGHTING AGREE

MENT GULF AND SOUTH ATLANTIC HAVANA STEAMSHIP CON

FERENCE AGREEMENT No 4188

No 851

IN THE MATTER OF ApPROVAL OF ARTICLE 1 OF FREIGHTING

AGREEMENT G 13 OF GULF AND SOUTH ATLANTIC HAVANA

STEAMSHIP CONFERENCE AGREEMENT No 4188

No 854

SWIFT COMPANY AND SWIFT COMPANY PACKERS

V

GULF AND SOUTH ATLANTIC HAVANA STEAMSHIP CONFERENCE

ET AL

An investigation docketed as Nos 849 and 851 having been en

tered upon by the Board on its own motion and the proceeding

docketed as No 854 being at issue upon complaint and answer on

file and the investigation and proceedings having been consoli

dated and duly heard with respect to all issues other than repara

tion after full investigation of the matters and things involved

having been had and the Board on the date hereof having made

and entered a report stating its conclusions decision and findings

therein which report is hereby referred to and made a part

hereof

6 F MB
234 FEDERAL MARITIME BOARD

Itis ordered That

1 Respondents be and they are hereby notified and req

immediately to cease and desist and to abstain from entering 

or continuing or performing any of the contracts agreemen

modification thereof restricting shipments of cargo originat

any inland port or place and moving via river or inland wat

terminating at touching or flowing through any Gulf or 

Atlantic port of the United States found herein to be in vio

of Sec 15 Shipping Act 1916 as amended

2 Respondents be and they are hereby notified and req

immediately to cease and desist and to abstain from a subj

particular persons localities and descriptions oftraffic to und

unreasonable prejudice or disadvantage b demanding cha

and collecting a rate which is unjustly discriminatory be

shippers and ports found herein to be in violation of Secs 1

17 of the Shipping Act 1916 as amended

3 Respondents be and they are hereby notified and req

immediately to cease and desist and abstain from extending 

rate system to cargo shipped from inland ports not serve

conference members found herein to be unlawful under Se

Third of the Shipping Act 1916 as amended

Itis further o1 dered That the proceedings docketed as No 

and No 851 be and they are hereby discontinued and

Itis further ordered That the proceeding docketed as No 

be and it is hereby held open for further proceedings o

claims of complainants for reparation if any

BY THE BOARD

Signed THOMAS LISI

Secret
FEDERAL MARITIME BOARD

No 848

IN RE RUBIN RUBIN RUBIN CORP N N SERPER COMPANY

ACADEMY FORWARDING COMPANY

Decided February 20 1961

Respondents Rubin Rubin Rubin Corp N N Serper Company shippers

and Academy Forwarding Company forwarders of paper products from

New York to Puerto Rico found to have knowingly and willfully by

means of false classification obtained transportation by water for

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

applicable inviolation of Sec 16 of the Shipping Act 1916 as amended

Herman L Weisman and Burton R Rubin for Rubin Rubin

Rubin Corporation Respondent

John B Forrest for N N Serper Co Respondent

Max J Dym for Academy Forwarding Corp Respondent

Mark P Schlefer and Harrison D Hutson for Bull Insular Line

Inc Intervener

Frank Gormley and Robert C Bamford as Public Counsel

REPORT OF THE BOARD

RALPH E WILSON Chairman THOMAS E STAKEM Vice

Chairman SIGFRID B UNANDER Member

BY THE BOARD

1 PROCEEDINGS

The Board as authorized by Sec 22 of the Shipping Act 1916

as amended Act instituted upon its own motion an investiga

tion of the lawfulness of certain shipments under Sec 16 of the

Act to determine whether respondent Rubin Rubin Rubin Corp

Rubin a shipper and a printer and manufacturer of printed

235

6 F M B
236 FEDERAL MARITIME BOARD

products and respondent N N SerpeI Company Serp

shipper of printed products and respondent Academy Forwa

Co Academy a forwarder had obtained transportation be

April 1955 and February 1957 for property consisting of 

products by water from the United States to Puerto Rico a

than the charges which otherwise would be applicable

Although not named as a respondent the intervener Bull 

lar Line Inc Bull Line filed a brief as the result of statem

made during the course of the hearing imputing to it know

of the alleged misclassification of shipments Under Sec 16 

ond ofthe Act it is unlawful for any common carrier by wa

allow any person to obtain transportation for property a

than the regular rates established and enforced by the line o

carrier by means of false billing false classification or b

other unj ust or unfair device or means No evidence develop

convince the Examiner that the carrier should also be m

respondent

The Examiner recommended that the shippers Rubin and S

be found to have committed unlawful acts and that the forw

Academy be found not to have committed any unlawful acts 

Sec 16 Exceptions and replies to the Examiner s recomme

decision werefiled and oral argument has been held

II FACTS

1 The shipper Rubin is a printer and manufacturer of com

tion books columnar ruled pads business blanks in tablet 

receipt books merchandise order books loose leaf fillers st

rapher notebooks quarter bound composition paper sales

order books memorandum books and various other schoo

business paper products These products are described in a 

logue issued by Rubin Rubin does not advertise the availa

of or ship nor does his catalogue describe blank pape

printers Rubin has shipped his products consisting prim

of composition books and paper items for use in schools since 

1950 In 1953 during a visit to Puerto Rico Leon Rubin 

President of Rubin learned that a loss of sales was caus

lower competitive prices made possible by competitors shi

their products as printing paper which may be shipped 

lower freight rate under the applicable tariffs of the com

carriers by water Before 1953 Rubin prepared bills of l

describing its products as stationery or composition bo

After this Rubin described similar merchandise as pr

6 F 
IN RE RUBIN RUBIN RUBIN CORP ET AL 237

paper Rubin ordered the change in the description in the bill

of lading which was prepared to obtain the lower freight rate and

so instructed its forwarder Academy

The procedure for instructing the forwarder was to send the

forwarder a

copy of Rubin s invoice to which was stapled a sheet

of paper on which was handwritten or typed the words no insur

ance Bull Line printing paper or words or abbreviations to this

effect and giving the name of the ship together with a

copy of an

order by the buyer in Puerto Rico The invoice described the

products as Trop meaning tropical a quality of paper fol

lowed by anumber or Agate a description of the cover designs

followed by a number or pads or green tint stenos or 8V2 x

11 pads ruled white or 200 page marble comps marble is

also a description of the cover design or simply a number refer

ring to items in its catalogue There were from one to fifteen

differently numbered and priced items on the invoices Opposite

each item were prices for each item and an extension of the totals

ofeach order

The instructions as to the printing paper designation werebegun

after Rubin learned the reason for the lower competitive prices

of these products in Puerto Rico and after a discussion of the

correct classification of the products with a representative from

the Bull Lines The evidence was not clear as to the detaUs of

the discussion with Bull Lines nor as to when it occurred Rubin

made such classifications on about 85 shipments in 1955 1956 and

1957

2 The shipper Serper ordered composition books from Rubin

for shipment to his customers in Puerto Rico Serper s orders be

gan around 1953 Rubin upon receiving a letter or telephone

order from Serper executed the order by having the goods pack

aged in cartons and delivered to the carrier at the dock Rubin

sent Serper an invoice covering the shipments The invoices con

tained the information referred to above Dock receipts covering

Serper s shipments were prepared by either Rubin or Serper

When prepared by Rubin a signed copy of the dock receipt would

be sent to Serper with Rubin s invoice After receiving these

papers Serper prepared the bills of lading and export declaration

Serper did not see or handle the products but he knew what they

looked like he knew what was in Rubin catalogue and he knew

what his customers ordered

When Serper in 1953 began selling composition books which

were the only Rubin products he ordered he was told by Leon

6 F MB
238 FEDERAL MARITIME BOARD

Rubin that the books should be classified as printing pap

was also told that this was all right with the Bull Line 

to the conversations which Rubin had with the Bull Line 

sentative SerpeI prepared his bills of lading dock receip

export declarations to read printing paper or unprinted p

the same as Rubin Serper made such classifications on ab

shipments of composition books and notebooks in 1956 and 1

3 The forwarder Academy was engaged by Rubin to p

its shipping documents Academy prepared the bill of ladin

dock receipt and the export declaration for Rubin The docu

were prepared on the basis of the written instructions stap

the commercial invoice as noted above Such written instru

were followed after a discussion with Rubin as to what to do 

invoices were the same as described above Academy did no

a

copy of Rubin s catalogue and never saw or handled the c

containing shipments The invoices however described Ru

Manufacturing Stationers and the president of Academy 

that Rubin was in the paper and printing business Academ

been a forwarder for Rubin since at least September 1953 

emy prepared export declarations containing references by 

number to items in so called Schedule B of the Bureau of C

which applies to Fine Paper Writing Paper and covers 

shipped by Rubin and not to printing paper

4 The commodity descriptions and classifications in the a

ble United States Atlantic and Gulf Puerto Rico Conf

Tariff No 6 January 1955 through January 9 1957 and 

thereafter refer to BOOKS Blank or Printed PAPE

PAPER ARTICLES Bond Not Otherwise Specified Pr

N O S Tablet ruled not padded riot bond and Wr

PRINTED MATTER N O S and STATIONERY and 

PLIES N O S The tariff shows a considerably lower ra

transporting articles classified as Printing Paper than fo

ing tablets stationery and similar products

The classification of printing paper or unprinted pape

peared in bills of lading of Bull Line and Alcoa Steamship 

pany Alcoa covering Rubin s shipments The bills of 

were dated various dates from February 25 1955 to Janu

1957 insofar as the bills of lading prepared by Academy a

cerned

In preparing his products for shipment Rubin would hav

placed in cartons which were stenciled variously as follows 

No 760 60 pages B Marble Comps 1

2 Gr 8 x 10 Marble 

6 F 
IN RE RUBIN RUBIN RUBIN CORP ET AL 239

144 pages No 972 All American Agate Comp Books 29 cents

or variationsofthe foregiong

III DISCUSSION

Rubin and Serper both shipped in foreign commerce between

1955 and 1957 many cartons of composition books and other kinds

of writing books and paper for school or business use under bills

oflading describing them as printing paper The bills of lading

were prepared by Academy or by Serper but the shippers were

responsible for the information in the bill of lading There is no

serious denial that the descriptions of the products shipped were

false The tariff provided a much more descriptive classification

covering the articles referred to in 4 above covering blank books

paper articles ruled tablets printed matter and stationery supplies

and since these classifications were not used the descriptions

chosen by the respondents constituted a false classification

The false classification resulted in the billing and payment of a

lower freight rate than would be applicable to the shipments if

they had been correctly classified

Sec 16 of the Act is violated by shippers and forwarders if the

false classification is knowingly and willfully made

We have held that where a shipper with full information about

the article shipped after studying the tariff chooses an improper

description consistently and continually by ignoring a more de

scriptive classification and where a shipper knows ofthe variance

between what is being shipped and what has been described such

shipper knowingly and willfully obtains transportation by water

for property at less than the rates or charges otherwise applicable

by means of a false classification Misclassification and Mishilling

of Glass Tumblers and Other Manufactured Glassware Items as

Jars 6 F M B 155 1960

We have also held that where a shipper has doubt as to the

proper tariff designation of his commodity he has a duty to make

diligent and good faith inquiry of the carrier or conference pub

lishing the tariff We also stated that resort to a definition of

an article which does such violence to the clear meaning of the

tariff at best manifests such an indifference and lack of care in

construing the tariff as to constitute a deliberate violation of Sec

16 Markt Hammacher Co Misclassification of Glassware 5

F M B 509 511 1958 A persistent failure to inform ones self

by means of normal business resources might mean a shipper or

6 F M B
240 FEDERAL MARITIME BOARD

forwarder was acting knowingly and willfully Indifferen

the part ofshippers is tantamount to outright and active vio

and diligent inquiry must be exercised by shippers and by 

warders Misclassijication of Tissue Paper as Newsprint P

4 F M B 483 1954

Rubin knew exactly what it manufactured and shipped 

while it correctly classified the products in bills of lading 

cordance with the tariff and paid the correct charges In 

after Rubin found out that it was losing business because o

freight acompany official made up his mind to change hi

lous action and to misdescribe the products in an appa

plausible way to get a lower freight rate In the meantime 

continued to have the cartons containing its products cor

stenciled and to prepare invoices with accurate references to 

they were

Rubin s concern was not with consistency or with tellin

truth about its product regardless of what the tariff contain

with conformity between what its officers knew its products 

and an unambiguous tariff description but only with doing 

others were doing This was athought out plan ofaction to a

a specific result saving money which was put into effe

giving new instructions to the forwarder and by continui

inconsistent course of action with respect to the cartons an

invoices after discussing the subject with others

Rubin s manager had a clear question in his mind abo

proper thing to do ie whether to change a previous Statio

and Composition Books description He resolved the qu

by changed action This was knowing and willful conduct 

extenuating circumstances that he was meeting unfair co

tion of others doing the same thing is not relevant unde

statute

The shipper Serper likewise showed no concern for the 

when it came to typing in the correct information in the b

lading which he prepared himself Serper knew also the 

acteristics of the product he was selling and that it was not 

ing paper Serper did not have to see the products to know 

the words printing paper which he typed on his bills of 

were untrue Since he claims not to have seen the tariff a

have been unfamiliar with its provisions its contents are 

terial as regards his knowledge about proper classification H

not describe the articles correctly and when confronted w

question about the variance between the description and wh

6 F 
IN RE RUBIN RUBIN RUBIN CORP ET AL 241

had to ship he did not consult the tariff nor the carrier to find out

the proper course ofaction He failed to seek enlightenment He

resolved any doubt in his mind or lack of knowledge about how to

prepare the papers by finding out from Rubin how it was done and

whetherit would get by not whether it was accurate

While Serper might not be well informed about the preparation

of a bill of lading he at least knew he was not shipping printing

paper and he made no effort to obtain enlightenment about the

obvious discrepancy between both the facts and the correct descrip

tions he saw on the invoices He did this above a warning in bold

face type on the bill of lading form reading as follows ATTEN

TION OF SHIPPERS is especially directed to Secs 235 236 U S

Criminal Code 18 U S Code 285 6 Sec 4472 U S Revised

Statutes 46 U S Code 170 Sec 16 Shipping Act 1916 46 U S

Code 815 Sec 3 subdiv 5 also Sec 4 subdivs 5 and 6 of the

Carriage of Goods by Sea Act 1936 46 U S Code 1303 subsec 5

46 U S Code 1304 subsecs 5 and 6 which provisions of law sub

ject shippers to substantial penalties liabilities and disabilities

for false classification misdescription or insufficient description

of goods etc Serper s conscious choice in the preparation of

the inaccurate bills oflading involved knowing and willful conduct

Academy had just as much information as Serper had and in

addition was an expert in the business of preparing shipping docu

ments Academy also had before it an invoice which clearly varied

from its instructions Academy ignored the variance and trans

lated 200 page marble comps and similar designations and a

variety of numbers into Printing Paper Academy unlike

Serper had a tariff book available containing words to describe

the invoiced articles but it made no effort to be guided by the

book or to discover what the many different invoice numbers and

prices referred to Instead it assumed they were all printing

paper Printing paper would rarely have the variety of prices

these invoices showed Academy did this even though for years

it had been forwarding Rubin s products under correct bills of

lading Then there was a change but Rubin did not change its

business or its product Academy conformed to the change with

out inquiry Academy too failed to resolve the obvious conflict in

descriptions and change of descriptions and used the wrong one

over the same bold face type warning to shippers Academy con

sistently and continually ignored a more descriptive classification

than printing paper It was argued that Rubin never asked Acad

emy for advice never discussed the matter and never told Acad

6 F M B
242 FEDERAL MARITIME BOARD

emy what it wasshipping Rubin didn thave to do this Ac

already knew what was being shipped

Still further evidence of Academy s knowledge is the fa

in preparing the export declaration its clerks picked out 

stantially correct code number from the Schedule B Sta

Classification of Domestic and Foreign Commodities Ex

from the United States and used it to designate items a

shipped While this code number and its heading does no

composition books apparently covered by other num

neither does it cover printing paper and the latter may be 

under other headings and numbers The page heading in 

ule B was generally descriptive and covered words like 

books and salesbooks Even though Academy selecte

stantially the correct code number covering composition bo

preparing the export declaration it also wrote in the words 

ing paper conforming the words with the bill oflading

The selection of the correct number from this technica

cation Schedule B requires considerable knowledge of the 

ucts and an ability to match their characteristics with the d

tions in the Schedule This was done substantially corre

the forwarder showing that it knew generally what it was sh

and that it was not printing paper which is under another n

The printing paper number was never used indicating a co

study of the schedule and the selection of a code numbe

written in the export declaration to identify products that 

emy knew were being shipped Academy knowing of the va

ignored the more descriptive classification in the tariff boo

effect of this aGtion would be to prevent the carriers which 

word comparisons between export declarations and bills of 

from discovering any misclassification yet Kive the Bureau 

Census which requires the documents fairly accurate inform

through the code number This is thought out deception

We conclude from the foregoing that the shipper Rub

Serper and the forwarder Academy have knowingly and w

directly by means of false classification obtained or attemp

obtain transportation by water for property at less than th

or charges which would otherwise be applicable

Bull Line and Alcoa were not made respondents but Bu

intervened to protect its interests No testimony was ta

obtain a full statement of their responsibility under Sec 

enough evidence was produced to show they followed proc

which might make them responsible under other circumst

6 F 
IN RE RUBIN RUBIN RUBIN CORP ET AL 243

There was clear evidence that both Bull Lines and Alcoa accept

bills of lading under a statement that the carriers have received

specified goods and packages and over the signature of the master

of the ship or someone acting in his behalf without having the

true facts checked by anyone directly responsible to the carriers

The closest they got to the goods or packages was to have their

receiving clerk sign or initial on the back of the biil of lading

after an employee ofthe stevedore known as the checker makes

a count ofthe boxes as they are taken off a truck at the pier The

checker may also measure the shipment The receivin clerk was

not shown to have gone out on the pier floor to make any examina

tion of the shipment He takes the checker s word and the master

of the ship necessarily takes the receiving clerk s word In this

case the checker and everyone else failed to notice the clearly

stenciled boxes with correct abbreviated descriptions on them

Counsel suggested that second third and fourth hand boxes are

common and they can t

go by stencils but no proof that this

was the case here was offered In fact the contrary was shown

Moreover where for years the stencils on the boxes accurately and

properly described their contents to the carrier such excuses are

weak at best We think a reasonable check of cargo should be

made by an employee responsible to the carrier when performing

such important acts as receiving cargo and signing the bill of

lading therefor Substantial legal rights in property are depen

dent on the actions of the carriers employees atthese points

Obviously most cargo can t be opened and inspected but far

more than a blind signing of bills of lading for the ship s master

and a comparison of words on papers in the carriers offices is

possible Moreover unquestioning reliance on s1ippers for the

truth as to the information on bills of lading is not enough Mis

classification and MisbiUing of Glass Tumblers and other Manu

factured Glassware Items as Jars supra

All of the respondents herein have violated the provisions of

the first paragraph of Sec 16 of the Act The facts and findings

herein shall be referred to the Department of Justice for appropri

ate action

6 F M B

732 047 0 64 17
244 FEDERAL MARITIME BOARD

ORDER

At a Session of the Federal Maritime Board held at its of

Washington D C on the 20th day of February 1961

No 848

RUBIN RUBIN RUBIN CORP N N SERPER COMPANY ACA

FORWARDING COMPANY

This proceeding having been initiated by the Board up

own motion and having been duly heard and submitted af

vestigation of the things and matters involved having be 

and the Board on the date hereof having made and ente

record a report containing its conclusions and decision th

which report is hereby referred to and made a part hereof

It is ordered That the following respondents be and ea

is hereby notified and required a to hereafter abstain fro

practices herein found to be unlawful under Sec 16 ofthe Sh

Act 1916 as amended and b to notify the Board with

10 days from the date of service hereof whether such re

ent has complied with this order and if so the manner in 

compliance has been made pursuant to Rule 1 c of the 

ofPractice and Procedure 46 CFR 2013

Rubin Rubin Rubin Corp

N N Serper Company

Academy Forwarding Company

The proceeding be and it is hereby discontinued

By the Board

Sgd THOMAS LISI

Secre

6 F 
FEDERAL MARITIME BOARD

No 815

COMMON CARRIERS BY WATER STATUS OF EXPRESS COMPANIES

TRUCK LINES AND O rHER NON VESSEL CARRIERS

Decided March 2 1961

Found that any person orbusiness association may be classified as a common

carrier by water who holds himself out by tbe establishment and main

tenance of tariffs by advertisement and solicitation and otherwise

to provide transportation for hire by water in interstate or foreign

commerce as defined in the Shipping Act 1916 assumes responsibility

or has liability imposed by law for the safe transportation of the ship

ments and arranges in his own name with underlying water carriers

for the performance of such transportation whether or not owning or

controlling the means by which such transportation is effected is a

common carrier by water as defined in the Shipping Act 1916

Status of individual respondents determined in accordance with above con

clusion except as to Weaver Bros Inc and Railway Express Agency

and except as otherwise noted as to other respondents named in the

report

William J Lippman a d Robert N Kharasch for American Red

Ball Transit Company Inc Burnham Van Service Inc Ford Van

Lines Incorporated Global Van Lines Inc Gray Moving Stor

age Inc Greyvan Lines Inc Lyon Van Lines Inc Lyon Van

Storage Co Martin Van Lines Inc Neptune Storage Inc North

American Van Lines Inc Rocky Ford Moving Vans Salt Lake

Transfer Company Sourdough Express Inc and Wheaton Van

Lines Inc respondents and Household Goods Carriers Bureau

and Movers Conference ofAmerica interveners

Donald Macleay and Harold E Mesiro W for Bekins Household

Shipping Company Bekins Van Lines Co Bekins Van and Storage

Co Bekins Van Lines Inc Bekins Moving and Stprage Co

Washington and Bekins Moving and Storage Co Oregon

respondents

245

6 F MB
246 FEDERAL MARITIME BOARD

Alan F WohlstetteT and Joseph F Mullins JT for Smyt

waiian Van Lines Inc Smyth International Van Lines 

Smyth Overseas Van Lines Inc Aero Mayflower Transit 

pany Inc and Allied Van Lines Inc respondents

CaTToll F Genovese for Carroll F Genovese Movers and W

housemen s Association of America King Van Lines Inc T

American Van Service Inc Von Del Ahe Van Lines Inc A

Vans Allied Pittsburgh Warehouse Van Company Inc 

Arpin Van Lines Inc Atlas Van Lines Inc Dean Van 

DeIcher Bros Storage Company DevVitt Transfer Storage 

pany Imperial Van Storage Inc Mollerup Van Lines 

business as Mollerup Van Lines Mollerup Moving St

Company Pan American Van Lines Inc Pyramid Van 

Inc Republic Van Storage Company Inc Security Stora

Van Company Inc Suddath Moving Storage Company 

and Weather Bros Transfer Inc respondents

H e1 be1 tBUTstein for Paul Arpin Van Lines Inc Columbi

Lines Inc Suddath Moving Storage Co Mover s and 

housemen s Association of America Inc Dean Van Lines 

Security Storage and Van Company Inc and Von Del Ah

Lines Inc respondents

John R Mahoney and Eugene T Liipfert for Conso

Freightways Inc and its divisions Garrison Fast Freigh

Foster Freight Lines Inc respondents

Ramon S Regan for United States Van Lines Inc respo

B W LaTouTette and G M Rebman for United Van Lines 

respondent

Robe1 t E Johnson for Railway Express Agency Incorpo

respondent

F1 ank L Ippolito for Porto Rican Express Company res

ent

Harry C Ames and James L Givan for Universal Carlo

and Distributing Company respondent

Paul J Coughlin for National Carloading Corporation res

ent

Ira L Ewers and Willia1n B Ewers for Alaska Steamship 

pany respondent

Odell KomineTs and J Alton Boyer for Pacific Far East 

Inc respondent

Willis R Deming and Alvin J Rockwell for Matson Navi

Company and the Oceanic Steamship Company respondents

6 F 
DETERMINATION OF COMMON CARRIER STATUS 247

Wa ner W Gardner and Vern Count1yman for American Presi

dent Lines Ltd respondent

Alpho nsus E Novick for Global Van Lines and Trans Ocean

Van Services respondents

Richard M Hartsock for Military Traffic Management Agency

intervener

Laurence E Masoner Henry A Cockrum and J C Kinney

Office of the Judge Advocate General on behalf ofthe Secretary of

the Army for the Department of Defense intervener

Clarence J Koontz Malcolm D Mille and J H Macomber Jr

for Administrator of General Services intervener

Mark P Schlefer and John Cunningham for Bull Insular Line

Inc and Alcoa Steamship Company Inc interveners

Robert B Hood Jr Edward Aptaker and Robert E MitcheU

as Public Counsel

6 F MB
248 FEDERAL MARITIME BOARD

REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER Mem

RALPH E WILSON Membe1

BY THE BOARD

1 PROCEEDINGS

This is a report on the results of a hearing and an investig

ordered by the Board by an order dated March 14 1957 

termine 1 the classification and status ofmotor truck comp

freight forwarders and express companies under the Sh

Act 1916 as amended Act and the Intercoastal Shipping 

1933 as amended Intercoastal Act in order to arrive atag

rule or interpretation applicable in the future to all person

2 the lawfulness of agreements filed under Sec 15 of the 

which the aforesaid classes of carriers are parties Seventy 

parties were made respondents and six parties not named 

spondents intervened Evidence was taken in the form of ve

statements and exhibits in response to questionnaires promu

by the Board The submission of briefs was followed by a r

mended decision of an Examiner and by exceptions thereto

II FACTS

Many motor truck companies freight forwarders and e

companies as part of their business provide the service of m

household goods and other personal property from points 

United States to points overseas using both trucks or vans 

they own or operate and ocean ships which they do not ow

operate Such companies and forwarders are the initial ca

Truck and rail service may be used overseas The initial ca

offer this service to the public by advertisement and solicit

The service consists of taking property from the shipper 

home or place of business carrying it by motor vehicle or ra

to a port having it loaded on a ship transported overseas a

further land transportation delivered to the consignee Hou

goods are frequently packed by the mover and generallyS pro

from damage in transit by appropriate padding and placed in 

sent to a port unloaded and repacked into specially built co

122 FR 1788 Federal Register No 53 March 19 1957 as amended in 24 FR 7340 

Register No 178 September 11 1959

6 F 
DETERMINATION OF COMMON CARRIER STATUS 249

ers which are used for the ocean shipment of household goods

They either own or lease the containers The loaded containers

are delivered into the custody of ship operators at the pier Any

needed stevedoring is handled by the initial carriers Railway

Express business is essentially a small package business Railway

Express transports packages under a single bill of lading naming

the Express Company as shipper Both types of carriers issue

their own through bills of lading to the original shipper consignor

By the bill s terms they agree to deliver the goods to the final desti

n tion named by the shipper and generally assumed liability for

safe arrival The extent of their monetary liability however

might be limited Claims for loss or damage are submitted to the

initial carriers Charges for these services and for the obligations

undertaken are those specified in the carriers tariff schedules and

regulations The tariff charges are for a combination of the costs

for preliminary packing in the case of household goods for land

transportation from origin to a port for over water transportation

including the cost of packing and unpacking of household goods

containers and for land transportation to the final destination and

delivery to the consignee and for overhead and profit The initial

carriers collect the freight charges based on this tariff The serv

ices have proven useful desired by the public and extensively used

Agreements have been filed with the Board by such motor truck

companies freight forwarders and express companies on the as

sumption that the signers were common carriers by water and re

quired to do so by Sec 15 of the Act

An agreement between 30 motor truck companies was placed in

the record of this proceeding The agreement designates a

Bureau A private corporation to administer the agreement

and obligates the parties 1 to file with the Board a tariff speci

fying the rates charges rules and regulations applicable to the

transportation of household goods between points covered by tne

agreement 2 to quote charge and collect rates and other charg

es only in accordance with the tariff adopted by the members pur

suant to the agreement 3 to furnish the bureau all information

required for its records 4 to cooperate by following prescribed

procedures in voting on proposals for the establishment or revision

of rates rules regulations or practices and 5 to furnish the

Board copies of various documents evidencing bureau action in

cluding the joint tariff observed by the signatory carriers This

agreement and others having the same objective have been per

6 F MB
250 FEDERAL MARITIME BOARD

formed by the filing of various tariffs containing charges for o

seas transportation ofhousehold goods

The general purpose of all the agreements is to require the 

natory carriers to charge uniform rates for moving house

goods as specified in the mutually agreed upon tariffs that 

adopted as part of the performance of the agreements

III DISCUSSION

The result to be achieved by our inquiry is to determine the 

tent to which these facts bring the respondents within the amb

Sec 15 of the Act and in so doing to provide an interpreta

thereof which may be used as a guide in determining its effec

other carriers and on future agreements involving similar servi

Sec 15 ofthe Act requires that every common carrier by wa

or other person subject to the Act shall file immediately a 

copy of every agreement with another such carrier or o

person subject to this Act fixing or regulating transporta

rates controlling regulating preventing or destroying com

tition or in any mannerproviding for an exclusive prefe

tial or cooperative working arrangement Agreements 

lawful only wh n and as long as approved by the Board Be

approval or after disapproval it is unlawful to perform the ag

ment Lawful agreements are excepted from the provision

the Federal laws relating to combinations in restraint oftrade 

monopolies contracts which may be construed to create restra

oftrade or monopolies are declared to be illegal 2and under ce

circumstances agreements among several carriers providing 

the establishment of uniform rates for cooperation and fo

exchange of information may constitute such illegal contracts

A determination of the extent to which respondents must com

with Sec 15 and come within its exception depends upon whe

the motor truck companies freight forwarders and express c

panies that make agreements among themselves fixing thro

rates for moving personal property overseas should be class

as and have the status of common carriers by water 3or C

2

15 use U 1 and 2

3 A common carrier by water is defined in the first section of the Shipping Act 19

mean a common carrier by water in foreign commerce or a common carrier by wa

interstate commerce on the high seas or the Great Lakes on regular routes from p

port 39 Stat 728 46 U S C 843 as amended

6 F M
DETERMINATION OF COMMON CARRIER STATUS 251

mon carriers by water in intercoastal commerce

4

and therefore

must file5such agreements with the Board Ifrespondents must

comply then the lawfulness 6

of the agreements and whether re

spondents may be excepted from the so called anti monopoly re

straint oftrade laws 1 must be determined

The entity which constitutes a common carrier by water in

foreign commerce as defined in the first section of the Act is sub

ject to the provisions of the Act The term common carrier is

not defined but the legislative history of the Act indicates that

the person to be regulated is the common carrier at common law

One who holds himself out to carry for hire the goods of those w40

choose to employ him Banana Distributors Inc v Grace Line

Inc 5 F M B 615 620 1959 We have also held that a re

spondent s status as common carrier does not depend on its

ownership or control or means oftransportation but rather on the

nature of its undertaking with the business which it serves

Where a party undertakes to transport from door to door it is a

common carrier over the entire limits of its routes both the por

tion over land and the portion over sea Where the respondent

assumed complete responsibility for the safe transportation and

delivery of goods entrusted to it from the time of rece pt from the

shipper until arrival at ultimate destination it was held to be a

common carrier by water Bernhard Ulmann Co Inc 3 F M B

771 1952

Railway Express Agency Inc was classified as a common car

rier by water hen it published a tariff naming rates and charges

applicable but restricted to shipments transported by ship be

tween ports in the United States and ports in Alaska pursuant to

4 A common carrier by water in intercoastal commerce is defined in the Intercoastal

Shipping Act 1933 to include every common and contract carrier by water engaged in the

transportation Cor hire oC passengers or property between one State oC the United States

and any other State oC the United States by way of the Panama Canal 47 Stat 142ii 46

U S C 843 as amended

5 Sec 15 oC the Shipping Act 1916 provides That every common carrier by water

shall file immediately with the Board a true copy of every agreement with another

carrier fixing or regulating transportation rates first par

6

Sec 15 of the Shipping Act 1 16 provides All agreements modifications or cancella

tions made aCter the organization of the Board shall be lawCul only when and as long as

approved by the Board Courth par

1

Every agreement modification or cancellation lawful under this section shall be ex

cepted from the provision oC the Act approved July second eighteen hundred ninety en

titled An Act to protect trade and commerce against unlawful restraints and monopoliel

and amendments and acts supplementary thereto and the provisions of sections seventy three

to seventy seven both inclusive oC the Act approved August twenty seventh eighteen hundred

and ninety four entitled An Act to reduce taxation to orovide revenue for the Government

and for other purposes and amendments and acts supplementary thereto Sec 15 fifth

par

6 F MB
52 FEDERAL MARITIME BOARD

an agreement with asteamship company The agreement prov

that the company received one half of the gross revenue under 

tariff The company did not issue a bill of lading or freight 

Le enter into an agreement with shippers Alaskan Rate

USMC 558 582 1941

Ip response to a disclaimer of common carrier by water st

because the carrier owned nothing that floats and carried not

across the water we held that such status does not depend o

ownership or control or means oftransportation but rather on 

nature of it undertaking with the public which it serves 

Act regulates those who perform or agree to perform water tra

portation service regardless of ship operation Bernhard Ulm

Co Inc v Porto Rican Express Co supra In the Ulmann 

we reported as to the respondent therein Since it undertake

transport from door to door it is a common carrier over the en

limits ofits route both the portion over land and the portion 

sea The facts indicated that the respondent s

freight bi

shippers showed total transportation charges and respondent 

dertook by its information furnished to the public and by ag

ments with shippers to assume complete responsibility for the 

transportation of goods entrusted to it from the time of rec

from the shipper at his store door in New York until arriva

ultimate destination in Puerto Rico It was decided that the 

spondent came within the definition of the term common ca

by water in foreign or interstate commerce as the term is 

in Sec 15 of the Act and in the Intercoastal Act within the m

ing of the first section of the Act 8

Both of these decisions 

volved iptercoastal operations or non foreign commerce 

present operations involve foreign commerce

The principal question here is which of the respondents likew

comes within the definition of common carrier by water as a re

of the conformance or non conformance of its activities with 

foregoing standards as applied to foreign commerce The Ex

iner found that our standards might be summarized as follo

a person who holds himself out by the establishment 

maintenance of tariffs by advertisement and solicitation 

otherwise to provide transportation for hire by water in inters

or foreign commerce as defined in the Shipping Act assu

responsibility for the safe water transportation of the shipme

M

Sec 5 of tht IntercoastRI Act provides that the provisions of the Act are extend

and shall apply to every common carrier by water in interstate commerce as defined in s

1 of the Shipping Act 1916

6 F M
DETERMINA TION OF COMMON CARRIER STATUS 253

and arranges in his own name with underlying water carriers for

the performance of such transportation whether or not owning

or controlling the means by which such transportation is effected

is a common carrier by water as defined in the Shipping Act

The Examiner found that most ofthe respondent motor carriers

freight forwarders and express companies were common carriers

by water within the meaning of such term in the first section of

the Act as a result ofthe application of these tests to their activi

ties as shown by the record before him

He concluded that their agreements fixing through transporta

tion rates had to be filed immediately and approved by us to be

lawful as required by Sec 15 ofthe Act

The exceptions relate only 1 to the extent to which certain

motor carriers because of the facts of their operations as shown

in the record were found not to be common carriers by water

when engaged in transporting household goods in foreign com

merce or in intercoastal commerce 2 to the failure to find that

respondents should also be considered as forwarders in the

ordinary sense of the word in their relationship with vessel op

erators and 3 to the Examiner s reference to the eligibility

of the different kinds of carriers instead of to the problem of

whether such agreements may exist bebi en such persons on

the one hand and vessel operating common carriers or other per

sons subject to the Act on the other hand

1

The excluded carriers were Carrol F Genovese Movers

Warehousemen s Association of America Inc Allied Pittsburg

Warehouse Van Co Inc Atlas Van Service Inc Howard Van

Lines Inc Pacific Freight Corporation Pan American Van Lines

Inc Puerto Rico Freight Delivery Co Smyth International Van

Lines Inc Bekins Moving Storage Co Oregon Bekins Van

Lines Inc California Bekins Van Storage Co California

and Weaver Bros Inc After the date ofthe recommended decision

the Bekins companies withdrew from the tariff fixing agreements

to which they were a party and which had been filed pursuant to

Sec 15 Of the remaining excluded carriers only Weaver Bros

after the Examiner filed his recommended decision submitted an

affidavit showing that their operations had been materially

changed since the time of their verified statement of their activi

ties used as a basis for the Examiner s conclusions The record

is reopened for receiving this document The sworn statement of

Weaver s general traffic manager was that it now 1 consoli

dates freight by picking up parts of whole shipments from sup

6 F MB
254 FEDERAL MARITIME BOARD

pliers or delivering carriers for assembling into single lots 

containerizes shipments in sealed vans and 3 moves fre

under through bills of lading issued by Weaver Bros under 

published through tariff schedules By the issue of its own bi

lading Weaver has arranged in its own name for the performa

of transportation obligations in line with the Examiner s t

According to its affidavit charges for the entire movement 

collected by Weaver and Weaver assumes sole responsibility 

the shipper for the safe water transportation of the shipmen

well as land functions at both origin and destination Weav

agreement with shippers as evidenced by the terms and co

tions which constitute the contract of carriage shown in the 

of lading which was a part of the affidavit however are at v

ance with the sworn statement It is agreed in Sec 3 of the 

of lading that Carrier shall in no event be liable in any capa

whatsoever for any delay nondelivery or misdelivery or for 

damage or loss occurring while the property is not in its ac

custody The property is not in Weaver s custody when it i

the custody of the vessel operator In Sec 12 of Weaver s bi

lading the obligation of the carrier is as follows

Any carrier hereunder in making arrangements for any transshippin

forwarding by any vessel or other means of transportation not operate

such carrier shall be considered only as a forwarding agent acting solely 

the convenience of the shipper without any responsibility whatsoever 

carriage by any transshipping or forwarding carrier and all transship

or forwarding shall be subject to all terms and conditions whatsoeve

the regular form of bill of lading freight note contract or other ship

document used at the time by such carrier whether issued for propert

not and even though such terms may be less favorable to the shippe

consignee than the terms of this bill of lading and may contain more strin

requirements as to notice or claim or commencement of suit and may ex

the on carrier from liability for negligence

These provisions show that Weaver has not assumed sole resp

sibility to the shipper for the safe water transportation of s

ments Instead it is a forwarding agent for the convenien

of the shipper insofar as the water transportation part of 

journey is concerned Because of the restricted nature of 

undertaking with the public as evidenced by its agreement w

shippers we find that Weaver has failed to bring itself within 

the definition of a common carrierby water

I The Terms and Conditions may have been mistakenly used since it is noted tha

l efer to said Puget Sound Alaska Van Lines Inc a party which is nowhete else re

to on the face of the Bill of Lading document headed Weaver Bros

6 F M 
DETERMINATION OF COMMON CARRIER STATUS 255

The Examiner found that Railway Express assumes liability

for the safe through transportation of the shipment It is noted

however that its Uniform Through Export Bill of Lading

Form 2100 4 57 in evidence contains under the heading

Additional Provisions as to Transportation to be Performed Be

yond the Boundaries ofthe United States and after the statement

The terms and conditions of this Order Bill of Lading under

which the shipment is accepted are printed on the back hereof

paragraph 10 therein which is on the back and reads as follows

The company shall not be liable for any loss damage or delay

in said shipments over ocean routes and their foreign connections

the destination of which is in a foreign country occurring outside

the boundaries of the United States which may be occasioned by

any such acts ladings laws regulations or customs Claims for

loss damage or delay must be made in writing to the carrier

issuing this bill of lading or its agent within nine months after

delivery ofthe property or in case of failure to make such delivery

then within nine months and fifteen days after date of shipment

and claims so made shall be deemed to have been made against any

carrier which may be liable hereunder Suits shall be instituted

only within two years and one day after the date when notice in

writing is given by the carrier to the claimant that the carrier has

disallowed the claim or any part or parts thereof Where claims

are not so made and or suits are not instituted thereon in accord

ancewith the foregoing provisions the carrier shall not be liable

Unlike the Weaver Bros bill of lading terms which expressly

create an agency relationship between the shipper and the ocean

carrier for the water portions of the transit Railway Express

terms appear to make it a principal as far as the ocean carrier is

concerned but with a disclaimer of liability The legal effect of

such an obligation is not clear

The Uniform Through Export Bill of Lading of Railway Ex

press is also made subject to Classification and Tariffs in effect

on the date hereof The International Tariff No 5 A in the

Exhibits and filed with the Board limits liability in Rule 13

Railway Express Agency will assume full common carrier

liability from origin to destination in the amount of 50 00 for

any shipment of 100 pounds or less and 50 per pound for any

shipment in excess of 100 pounds Railway Express might how

ever accept the terms and conditions of the receipts or bills of

lading of ocean carriers involvinga different liability

6 F MB
256 FEDERAL MARITIME BOARD

We do not pass on the legality of these disclaimers of liabi

Railway Express did not file a brief and the effect of these 

visions was not explored If the provisions are valid Rail

Express does not assume liability and would not be a comm

carrier by water under the Examiner s tests But if Railw

Express as a common carrier has liability imposed on it notw

standing these provisions then it may be a common carrier 

water In view of the unresolved status of Railway Expre

liability to shippers on the over the water portion of the tra

portation which it handles we are unable to come to any 

clusion about the status of Railway Express as a common car

by water Until such aconclusion can be clearly reached based 

an unequivocal assumption of liability to shippers or a show

of an imposition of liability by the courts we conclude Railw

Express is not a common carrier by water and its r te fix

agreement may not be received for filing To permit furt

examination of the liability issue this proceeding is held open 

to Railway Express so that further proof in the form of briefs 

oral argument may be received and considered by the Bo

Upon completion of such a review a report will be issued as 

Railway Express

As regards the Examiner s recommended decision we conclu

however that the assumption or attempted assumption of liab

should not be the sole test of common carrier by water sta

Rather the actual existence or imposition of liability is als

significant factor Actual liability as a common carrier over 

entire journey including the water portion is essential

In the absence of exceptions by the remaining carriers exclu

from being considered as common carriers by water the rec

mended decision is adopted as to such carriers All ofthe rem

ing respondents are classified as and found to have the status 

common carriers by water as we interpret such term in the 

section of the Act or as common carriers by water in intercoa

commerce as we interpret such term in the Intercoastal Shipp

Act 1933

We conclude that a person or business association may be c

sified as a common carrier by water who holds himself out by 

establishment and maintenance of tariffs by advertisement 

solicitation and otherwise to provide trarlsportation for hire 

water in interstate or foreign commerce as defined in the Shipp

Act 1916 assumes responsibility or has liability imposed by 

for the safe transportation of the shipments and arranges in 

6 F M 
DETERMINATION OF COMMON CARRIER STATUS 257

own name with underlying water carriers for the performance

of such transportation whether or not owning or controlling the

means by which such transportation is effected is a common car

rier by water as defined in the Shipping Act 1916

One of the purposes of the proceeding was also to investigate

the lawfulness of all agreements filed under Sec 15 of the Act in

which motor truck companies freight forwarders and express

companies are parties thereto This does not appear to be possible

on the record before us since it includes only one agreement To

the extent that agreements are being filed IO they are subject to re

view and approval or disapproval on a case by case basis pursuant

to 46 CFR 9

222 14 This procedure will be continued and nothing

herein shall affect any approval specifically granted heretofore

by the Board

10 Filing is required by Sec l6 of the Act and implementing regulations contained in 46

CFR U 222 11 222 16

6 F MB
258 FEDERAL MARITIME BOARD 

ORDER

At a Session of the FEDERAL MARITIME BOARD held a

office in Washington D C on the 2nd day of March 1961

No 815

COMMON CARRIERS BY VATER STATUS OF EXPRESS COMPAN

TRUCK LINES AND OTHER NON VESSEL CARRIERS

This proceeding having been entered upon by the Board on 

own motion and having been duly heard and submitted by 

parties and full investigation of the matters and things hav

been had and the Board on the date hereof having made 

entered of record a report stating its conclusions and deci

thereon which report is hereby referred to and made a 

hereof

Itis ordered That this proceeding be and it is hereby disc

tinued as to all respondents named herein except Railway Expr

Agency and

It is further ordered That this proceeding be and it is h re

held open as to Railway Express Agency for a period of 30 d

from the date hereof for the submission of such further proo

may be offered by Railway Express Agency to determine its sta

as a common carrier by water as defined in the Shipping Act 1

as amended

By the Board

6 F M
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No 8 122

MOORE McCORMACK LINES INC

ApPLICATION UNDER SECTION 805 a

Decided MOII ch 24 1961

Moore McCormack Lines Inc granted written permISSIon under Section

805 a of the Merchant Marine Act 1936 as amended for its vessel

the SS MORMACSUN presently under time charter t

States Marine

Lines Inc to engage in one eastbound intercoastal voyage carrying a

cargo of lumber and or lumber products from United States North

Pacific ports to United States Atlantic ports commencing on or about

April 2 1961 since granting of the permission found 1 not to result

in l1nfair competition to any person firm or corp Uation operating ex

clusively in the coastwise or intercoastal trade and 2 not to be

prejudicial to the objects and policy of the Merchant Marine Act 1936

as amended

Ira L Ewers for applicant

Donald Brunner as Public Counsel

REPORT OF THE DEPUTY MARITIME ADMINISTRATOR

BY THE DEPUTY MARITIME ADMINISTRATOR

Moore McCormack Lines Inc filed an application for written

permission under Section 805 a of the Merchant Marine Act

1936 as amended 46 U S C 1223 the Act 1

for its vessel the

SSe MORMACSUN presently under time charter to States Marine

Lines Inc to engage in one eastbound intercoastal voyage carry

ing a cargo of lumber andor lumber products commencing at

United States North Pacific ports on or about April 2 1961 for

discharge at United States Atlantic ports

1

Section 805 a is set forth in Appendix A attached hereto

259

6 M A

712 047 0 114 18
260 MARITIME ADMINISTRATION

The application was duly noticed in the Federal Registe

March 18 1961 26 F R 2324 Hearing was held on March 

1961 No parties intervened in opposition to the granting o

requested permission

The testimony in this case shows that States Marine has c

bookings of approximately 614 million feet of lumber and lum

products States Marine has been unable to obtain any other 

able ship for an early April departure This sailing whic

scheduled to commence shortly after loading on April 2 1961 

not increase the normal pattern of scheduling in States Ma

Lines Inc eastbound intercoastal service

On this record it is found that the granting of the reque

permission will not result in unfair competition to any person 

or corporation operating exclusively in the coastwise or in

coastal trade or be prejudicial to the objects and policy ofthe 

This report shall serve as written permission for the voyag

6 M 
MOORE McCORMACK LINES INC SECT 805 A APPLICATION 261

ApPENDIX A

Section 805 a

It shall be unlawful to award or pay any subsidy to any contractor under

authority of title VI of this Act or to charter any vessel to any person

under title VII of this Act if said contractor or charterer or any holding

company subsidiary affiliate or associate of such contractor or chadcrer

or any officer director agent or executive thereof directly or indirectly

shall own operate or charter any vessel or vessels engaged in the domestic

intercoastal or coastwise service or own any pecuniary interest directly or

indirectly in any person or concern that owns charters or operates any

vessel or vessels in the domestic intercoastal or coastwise service without

the written permission of the Commission Every person firm or corporation

having any interest in such application shall be permitted to intervene and

the Commission shall give a hearing to the applicant and the intervenors

The Commission shall not grant any such application if the Commission

finds it will result in unfair competition to any person firm or corporation

operating exclusively in the coastwise or intercoastal service or that it would

be prejudicial to the objects and policy of this Act Provided that if such

contractor or other person above described or a predecessor in interest was

in bona fide operation as a common carrier by water in the domestic inter

coastal or coastwise trade in 1935 over the route or routes or in the trade

or trades for which application is made and has so operated since that time

or if engaged in furnishing seasonal service only was in bona fide operation

in 1935 during the season ordinarily covered by its operation except in

either event as to interruptions of service over which the applicant or its

predecessor in interest had no control the Commission shall grant such per

mission without requiring further proof that public interest and convenience

will be served by such operation and without further proceedings as to the

competition in such route ortrade

If such application be allowed it shall be unlawful for any of the persons

mentioned in this section to divert directly or indirectly any moneys

property or other thing of value used in foreign trade operations for which

a subsidy is paid by the United States into any such coastwise or inter

coastal operations and whosoever shall violate this provision shall be guilty

of a misdemeanor

6 M A
FEDERAL MARITIME BOARD

No 827

PHILIP R CONSOLO

v

FLOTA MERCANTE GRANCOLOMBIANA S A

No 827 Sub No 1

PHILIP R CONSOLO

v

FLOTA MERCANTE GRANCOLO MBIANA S A

Decided March 28 1961

Complainant found injured to the extent of 143 370 98 by respond

refusal to allocate between August 23 1957 and July 12 1959 re

erated space on respondent s ships for the carriage of bananas 

Ecuador to North Atlantic ports of the United States and repara

in such amount is awarded

Robert N K w1Csch and W illian J LiplJman for complain

Philip R Consolo

Odell K01niners Renato C Gial101 enzi and John H Dough

for respondent Flota IVlercante Grancolombiana S A

REPORT OF THE BOARD

THOMAS E STAKEM Chainnan SIGFRID B UNANDER

Vice Chai1 man RALPH E TILSON Mel1 ber

BY THE BOARD

1 PROCEEDINGS

By an order on June 22 1939 the Board ordered that the 

ceeding docketed as No 827 be held open for further proceed

262

6 F M 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 263

on the claim of the complainant Philip R Consolo Consolo for

reparations if any 5 FlVI B 633 641 pursuant to Sec 22 of the

Shipping Act 1916 as amended Act The present proceedings

are in response to a complaint to Docket No 827 filed November

15 1957 by Consolo requesting an order by the Board ordering

Flota Mercante Grancolombiana S A Flota to pay reparation

for damages during the period November 4 1955 through N ovem

bel 4 1957 in the amount of 600 000 and other relief and to a

supplemental complaint filed November 18 1959 Docket No 827

sub No 1 by Consolo requesting an order by the Board ordering

Flota to pay reparation for damages during the period November

15 1957 through September 1 1959 in the sum of 250 000 and

for other relief

By its report and order of June 22 1959 served July 2 1959 in

Philip R Consolo et al v Flota Mercante GT ncolo1f biana S A

5 F M B 633 1959 the Board found Flota to be a common carrier

by water in the operation of ships between the west coast ports of

outh America and United States Atlantic ports and found Flota s

practice of contracting all of its refrigerated space on its ships

operating between Ecuador and ports on the North Atlantic coast

of the United States to a single shipper to be unjustly discrimina

tory and unreasonably prej udicial in violation ofthe Act

The further proceedings and hearing on the claim for repara

tions were had by an examiner who on October 5 1960 submitted

a recommended decision that reparations were due in the amount

of 259 812 26 Exceptions and replies thereto were filed Oral

argument before the Board was held on January 25 1961

II FACTS

Consolo an experienced and qualified shipper of bananas for

many years between Ecuador and the United States was found to

have proven his complaint that Flota s practice of excluding him

was in violation of Secs 14 and 16 of the Act The Board s find

ings of fact conclusions decision and order on this phase of the

proceedings were entered of record and reported in Phil ip R

Consolo et al v Flota Me1 cante G1 ancolO1nbiana S A Supra

In its report the Board found that Flota in the ope ation of its

freight ships between Ecuador and the U S North Atlantic ports

and U S Gulf of Mexico ports is a common carrier by water in the

foreign commerce of the U S page 638 No date was established

for the beginning of such status but Flota was shown to have

operated since July 20 1955 between Ecuador and the U S on an

6 F M B
264 FEDERAL MARITIME BOARD

approximately weekly schedule with 5 ships and that it now o

ates 6 ships Consolo did not use any of these ships until Sept

ber 1 1959

Consolo first exp essed an interest in space in the Spring 

1955 when he had a conference with Flota officers and made 

quiry as to the height of each chamber for banana storage 

then the rate they were asking for the ships He inspected a 

later and found fault with the height of the storage cham

Consolo was given figures as to what Flota wanted for the s

in its entirety sic but he asked for a reduced rate on the lo

chamber or for the two upper chambers at the proposed ra

The counter offers were rejected Other negotiations for a 

tract by correspondence and by conversations in 1956 and 1

did not result in a mutually acceptable arrangement At no t

before August 23 1957 did Consolo ask for an allotment of sp

at a

regular tariff rate but accepted the prevalent trade custom 

either bidding or negotiating for space on a contractual basis

Consolo proved that he could have bought and sold 5 000 

15 000 additional stems of bananas if Flota had allotted him sp

By a letter dated August 23 1957 addressed to Flot3 at Bog

Colombia Consolo wrote asking to be considered for a fair 

reasonable amount of space on Flota s ships The letter refe

to our dockets Nos 771 and 775 as the basis for this requ

Flota s reply dated October 7 1957 was that reefer space on 

vessels has been committed for the next two years

By its order of June 22 1959 served July 2 1959 the Bo

ordered Flota to cease and desist and to abstain from ente

into or continuing or performing any of the contracts ag

ments or understandings for the carriage of bananas fo

herein to be in violation of sections 14 and 16 of the Shipping 

1916 as amended not later than August 1 1959 Respondent 

also ordered to offer within 10 days after July 2 1959 all qual

banana shippers refrigerated space for the carriage of bana

No proofs were introduced in the present proceeding to show 

this order was complied with An allotment of space was mad

Flota September 1 1959 when Consolo was one of five qual

shippers who applied for and were allotted space

III DISCUSSION

Sec 22 of the Act authorizes any person to file a sworn c

plaint asking reparation for the injury if any caused by 

violation of the Act Exclusion of complainant Consolo from 

6 F M 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 265

use of Flota s common carrier service from Ecuador has been

found to be a violation of the Act Consolo filed a sworn complaint

asking for reparations An examiner conducted proceedings in

which the issues were limited to ascertaining the period of injury

and the computation of the amount due as damages for injury

The examiner recommended that complainant is entitled to repara

tion in the amount of 259 812 56 based on 105 voyages during the

period August 23 1957 to September 1 1959 yielding a net profit

of 779 436 78 of which Consolo was entitled to one third

In interpreting Sec 22 in R Hernandez v A Bernstein

Schiffahrtgesellschaft 1 U S M C 686 1937 the U S Maritime

Commission held that defendants unjustly discriminated against

complainant in violation of paragraph Fourth of Sec 14 of the

Act by refusing to book cargo in response to applications by

complainants for the transportation of automobiles Complainant

was shown to have exported unboxed automobiles by securing

steamship booking and then purchasing the automobiles therefor

Complainant was also shown to have the ability to obtain auto

mobiles for shipment In some cases complainant also had small

lots of automobiles available in New York ready to ship to Bilbao

Spain before booking Defendants were shown to have held them

selves out as common carriers of unboxed automobiles from New

York to Bilbao Their ships were constructed to accommodate

automobiles and capacity was available The number of automo

biles required to fulfill complainant s contract to sell to a dealer

in Spain was showr Complainant proved a loss of 15 profit

on prospective shipments Proximate injury was held to have

been caused complainant because of his inability to supply auto

mobiles pursuant to an agreement with the importer in Spain

The case was as igned further hearing to determine the amount

of reparations due in the absence of evidence 1 that all the

cars upon which reparation was based could have been carried

by defendants 2 as to the amount of space which was available

and 3 as to the value of the cars which could have been carried

in such available space

In Roberto Hernandez Inc v Arnold Bernstein S M B H

2 U S M C 62 1939 the above elements were proven and repara

tions equal to the estimated net profits that would have been

earned during the reparations period were established

The defendants having failed to comply with the order the

appellant brought suit for enforcement pursuant to Sec 30 of the

Act The defendants resisted enforcement on the ground that

6 F M B
266 FEDERAL MARITIME BOARD

1 there was no basis for the plaintiff s claim and 2 it 

plaintiff s duty to mitigate any damages The District Co

agreed in Roberto Hernandez Inc v ATnold Be1 nstein S M B 

31 F Supp 76 D C N Y 1940 but on appeal Circuit Co

reversed in 116 F 2d 849 851 2nd Cir 1941 stating that 

District Court raised too high a standard on which to test 

proof as to damages as found by the Commission The Court h

that vhere the Commission s

findings are supported by s

stantial evidence and where no new evidence on the sub

is introduced it is the duty of the court to accept and g

them effect The duty of the court is equally that of the Bo

The basis for plaintiff s claim was found to exist and the C

stated that the burden to show a failure to mitigate the dama

was upon the defendants

In the reparation hearing in Water1nan et al v Stockho

Rederriaktiebolag Svea et al 3 F M B 248 1950 the Bo

found that the complainants had not sustained the burden 

proof because of want of proof on cost outturn and se

price but in so holding acknowledged that damages are to 

based on the difference between cost and selling price wh

there was a refusal to furnish refrigerated space to the c

plaining fruit shippers

The Supreme Court has held that ordinarily the measure 

damages in such case refusal to carry is the difference betw

the value of the goods at the point of tender and their valu

the proposed destination less the cost of carriage McLea

Denver Rio Grande R R Co 203 U S 38 49 27 S Ct 

1906 In accord are 9 Am JUl Carriers S 314 3 Hutchin

on Carriers 3rd Ed SS 1359 1370 2 Moore on Carriers S 

13 C J S Carriers S 33 and see Sonken Galan ba Corp 

Atchinson T S F Ry Co 124 F 2d 952 958 8th Cir 19

In the present case proof of damages meeting the spe

standards of cost outturn and selling price was offered in de

Witnesses were agreed on the avallability of bananas in Ecua

and the existence of a market for them in the United Sta

Consolo was shown to have the resources to buy and ship bana

The loading sheets showing actual purchases and the out

sheets showing actual sales and liquidation sheets repo

commission merchant to importer showing proceeds of sale 

penses commission and net proceeds were used for each s

ment of bananas by Consolo on Grace Line ships during 

reparation period The space that would have been used on F

6 F M 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 267

ships at Flota s

freight rates during the reparation period was

shown Costs in Ecuador were taken from actual loading sheets

showing actual purchases week by week Freight charges were

supplied from Flota s records of actual freight collected on its

voyages during the reparation period Stevedoring costs came

from testimony of banana shippers as to actual costs at New York

We find the figures used in the reparation computation to be fully

supported in the record The computation itself using the above

data established a dollar figure for profit or loss per banana stem

shipped before stevedqring and freight From the amOllnt ofprofit

per voyage the freight stevedoring and incidental administrative

overhead and other expenses have been deducted The examiner s

conclusions were based on these fully documented facts

Consolo excepted to the examiner s recommendation that the

reparation period did not begin until August 23 1957 and to the

failure to recommend that Consolo be awarded reparation for the

period November 15 1955 through September 1959 inclusive

Consolo also excepted to an error in computing damages within

the period August 23 1957 to Septembel 1 1959 on the ground

that the deduction from profit for stevedoring costs should be

the cost for stevedoring in Philadelphia instead of New York

The New York costs were shown to be 48 8 cents per stem whereas

the actual Philadelphia costs were later shown to be 35 15 cents

per stem

Flota excepted to the following

1 The Examiner s ultimate recommendation

2 The Examiner s failure to recognize that the Board s decision

of June 22 1959 did not purport to determine liability for the

period prior thereto

3 The incompleteness of the Examiner s

findings as to the facts

and circumstances confronting Flota prior to and during the

period for which reparations are sought and to his faiiure to

consider and make complete findings thereon as contained in

Flota s opening brief on reparations and in the present brief

and his failure to find that in light of such circumstances Flota s

actions were completely reasonable and violated no provision of

the Act and no obligation to Consolo

4 The Examiner s failure to find that in any event award of

reparations would be inequitable and unjust and for that reason

should be denied

6 F M B
268 FEDERAL MARITIME BOARD

5 The Examiner s inclusion of voyages subsequent to 

Board s

report of June 22 1959 in calculating reparations 

to his failure to find that Flota acted promptly thereafte

comply with the Board s order and therefore incurred no liab

during that period

6 The Examiner s failure to find that the burden of proof 

all issues was upon Consolo including the alleged violation p

to compliance with the Board s order of June 22 1959 the all

injury to Consolo during the period and the extent of any 

injury and to his failure to impose that burden on Consolo

7 The Examiner s failure to find that the record proves t

was no injury to Consolo and that Consolo s claim of injury is 

bona fide

8 The Examiner s failure to find that Consolo s claimed lo

are speculative

9 The application by the Examiner of an incorrect measu

damages

10 The Examiner s incorrect computation of reparations 

cluding his arbitrary allocation to Consolo of one third of Fl

space for calculation purposes his failure to appreciate 

significance of the 1846 percent figure representing the alloc

to Consolo following the Board s order of June 22 1959

11 The Examiner s failure to hold that Consolo is not 

proper party complainant

12 The Examiner s conclusion that Consolo could not 

minimized his damages if any by utilizin other available tr

portation including specifically Grace Line Chilean Line 

chartered vessels

13 The recommended award of inter st on reparations

14 The Examiner s subsidiary findings or the possible imp

tions therefrom inconsistent with the foregoing exceptions lis

certain findings of fact

15 The Examiner s failure to find that the renewal of Pan

Ecuador s Panama Ecuador Shipping Corporation exclu

shipper on Flota s ships contract in 1957 was based UPD

option contained in the 1955 contract between Flota and Pan

Ecuador and upon Flota s action determining that Pan

Ecuador s bid was the most favorable to it all of which occu

prior to the Board s decision in Banana Dist1 ibutors Inc v G

Line Inc 5 F M B 278 1957

16 The Examiner s failure to find that there was no signifi

competition between Consolo and Panama Ecuador

6 F 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 269

17 The method of ascertaining damages employed by the

Examiner

18 The Examiner s failure to make subsidiary findings as to

the components of the recommended 259 812 26 reparations

19 The Examiner s failure to enter findings in accordance with

the facts recited by Flota in its opening brief on reparations

The arguments supporting the exceptions are essentially 1

that the Board did not in Philip R Consolo et al v Flota Mercante

G1ancolornbianCt SUpT find Flota guilty of violating the Act

before June 22 1959 2 that in contracting all ofits refrigerated

space for bananas to a single shipper before then Flota acted

legally 3 that the failure of the Board or the Board s staff

prior to June 22 1959 to give Flota a legal opinion in response

to a petition for declaratory relief as to the validity of Flota s

exclusive patronage contract prevents the Board from considering

Flota as having acted wrongfully 4 that the complaint and

request for the losses are speculative the claim for reparation

is not bona fide and the burden of proving loss has not been

sustained and 5 the damages were incorrectly measured and

computed and interest should not be added

For the reasons given below we agree in part only with the

respondent s exceptions as to the computation of reparations and

to the award ofinterest on reparations The remaining exceptions

are rejected Exceptions and proposed findings not discussed in

this report nor reflected in our findings have been considered and

found not justified

The first and thirteenth exceptions refer to the award of in

terest on reparations We find that it would be inequitable to

award interest on an unliquidated claim before it was due and

disallow any interest on the award herein

In exception two respondent argues that it acted reasonably

and did not unjustly unfairly or unreasonably discriminate

against Consolo and therefore did not violate any statute during

the period before the Board s order or June 22 1959 In exception

three the incompleteness of the findings is averred and in exception

four failure to find inequity in an award is excepted to Our

report in 5 F M B 633 has already held that in the past Flota

has acted in violation of Sees 14 Fourth and 16 of the Act

639 The facts and circumstances omitted all relate to more

arguments that Flota did not violate the Act before June 22 1959

Such facts and the issues they raise have already been considered

and decided in the first proceeding and are not appropriate sub

6 F M B
270 FEDERAL MARITIME BOARD

jects for exceptions in the reparations phase of this docket 

examiner properly did not review these facts nor retry the iss

they raise The previous report on these issues is plain an

final as far as the Board is concerned The only remaining is

was the measure of the reparation Consolo is entitled to un

Sec 22 of the Act Facts bearing on this issue alone were all 

examiner was required to consider

The exceptions are also based on the argument that beca

Flota had contracted all of its space to another single ship

during the period involved reparations would be inequitable 

unjust and the inclusion of voyages before June 22 1959 w

the favored shipper s contract was still being performed was 

proper This argument too uses the erroneous premise that 

formance of the exclusive patronage contract during a time w

Flota unjustly discriminated against a shipper in the matte

cargo space and gave undue and unreasonable preference 

advantage to particular persons was a valid excuse for n

performance of obligations under Secs 14 and 16 of the Act 

performance of the contract is the very act which constit tes 

violation of such sections We have held that such conduct 

improper in the following words It is clear that t

Consolo and Banana Distributors Inc were denied reefer s

accomlnodations by Flota to their prejudice and disadvanta

and that Panama Ecuador in receiving and using that space 

favored and advantaged We find no justification for this con

on the part of Flota and conclude that in denying reefer s

to complainants and in granting that space to a single favo

shipper Flota has acted in violation of Secs 14 Fourth and 

of the Act Philip R Consolo et al v Flota Mwtcante G

colombiana supTa at 638 In other words as long as the cont

caused the denial of space there was a violation The viola

did not begin June 22 1959 but long before this There can 

no question of inequity or unjustness to a

respondent who viol

the Act by means of an exclusionary contract It is the exclu

shipper who has the equities on his side under the Act not 

favored shipper nor the discriminatory and preference giv

carrier

One of the arguments advanced to prove absence of faul

failing to offer non discriminatory and non preferential ser

was 1 that Flota had filed a petition for declaratory re

Docket No 835 decided in PhilijJ R Consolo et al v F

MpTca ntc Gl ancolombiana f F M B h 19 9 a king 

I F 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 271

Board to determine the validity of Flota s contracts and to termi

nate the uncertainty that had arisen as a result of the conflicting

demands upon Flota following the decision in Banana Distributors

Inc v Grace Line Inc 5 F M B 278 and 5 F M B 615 1959 and

2 that the Board failed to make a timely response thereto It

was not incumbent on the Board however to give Flota a legal

opinion on the effect of its conduct on shippers The demands

were conflicting only to the extent that Flota made them so by

continuing to serve favored shippers The subsequent uncertainty

was the consequence of Flota s own position that it could con

tinue to contract refrigerated space to preferred shippers and

to exclude complainants without violating the Act as was con

tended in Grace Line Inc v Federal Ma1 itirne Boan 280 F 2d

790 2nd Cir 1960 In Philip R Consolo v Graef Line Inc

4 F M B 293 1953 and Banana Dist ibutors Inc v ace LIne

Inc 5 F M B 278 1957 the Board decided that Grace Line Inc

was a common carrier by water under sufficiently similar facts

as to lead the Board to state in the present case 5 FlVLB 633

that what we said in the Banana Dist ibutors case is appropriate

here and we feel is dispositive of the issues in this proceeding

Instead of accepting the Grace Line cases as providing a rule for

its guidance Flota refused to offer service and litigated the issues

relying on arguments relating to the differences between Flota s

vessels and Grace s vessels 635 to justify such refusal Flota

was eventually found to have violated Secs 14 Fourth and 16

of the Act No delay conv rted its past violations into lawful

conduct and Flota must take the consequences of its refusal it

became a common carrier in 1955 to take Consolo s cargo after

Consolo asked for non preferential service in 1957 Common car

rier status is not created by nor are violations of the Act non

existent untilthe Board s report is served Both are brought about

by Flota s own actions beginning in 1955

The 5th exception relates to the inclusion in the reparations

calculations of voyages after June 22 1959 which is the date our

decision in No 827 was made The e aminer extended the dam

age period to September 1 1959 when Consolo was actually al

lotted space in response to the Board s order served on July 2

1959 Respondents were ordered within 10 days after the date of

service of the order to offer refrigerated space for the carriage of

bananas on its ships to all qualified banana shippers Flota made

no offers between June 22 and July 12 1959 but we have no reason

to doubt that Flota would have offered space on July 12 if bananas

Ii F M B
272 FEDERAL MARITIME BOARD

had been tendered in Guayaquil at that time None weretend

before then as far as this record shows No shipments were r

until September but this does not furnish a reaso for exten

the damage period beyond the date when the Board s order sh

have been complied with in the absence of any offer of proo

complainant of a refusal after July 12 1959 and in the absen

proof of its own willingness to ship nor of a tender of cargo 

damage period should not be extended to the time when the 

plainant shipper was ready to provide a cargo but is limite

voyages departing from Guayaquil through July 12 1959 the 

when compliance should have begun Cf Swift Company 

Swift and Company Packers v Gulf and South Atlantic Ha

SS Conference et al Docket No 854 Decided February 2 196

The sixth seventh and eighth exceptions all concern the p

of injury offered by complainant and allege a failure to mai

the burden of proof or to show actual damage The burde

proof was maintained by extensive testimony and exhibits sho

availability of bananas cost selling price 226 quotations ov

period of four years were shown and freight stevedoring 

other expenses as noted above The actual damages were sh0w

be a proximate result of violations of the statute Waterma

Stockholms Rederiaktiebolag Svea et al 3 F M B 248 249 19

The losses shown were not speculative but fairly inferrable 

the data supplied and testimony of witnesses that compla

would have shipped on Flota ships ifhe had not been excluded

The ninth tenth and seventeenth exceptions deal with 

method of measuring and comupting the damages The exam

began the measure of damages from August 23 1957 instea

1955 as claimed We agree with the examiner s date and with 

finding that Consolo s offers and counter offers for service b

then were for contract carriage and not for space on a non pr

ential basis He was not excluded before then because he n

sought an allocation of space on an equal basis vith other 

pers rather Flota s facilities or charges for services were 

acceptable to the complainant on complainant s terms T

negotiations may not be translated into requests for a non pe

ential allocation of space on a common carrier by water W

Flota refused during this period was the demand for a special 

tract which would make Consolo a favored shipper too

The examiner found Consolo entitled to one third of Fl

space based on the fact that complainant was one of three q

fied applicants for space Other applicants were declared t

6 F 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 273

unqualified When space was finally allocated five shippers actually

qualified and measurement by Flota s technical adviser showed

that in actual practice over a period of time there had been an

allotment to and use by Consolo of 1846 ofthe cubic capacity of

Flota s ships on the U S Atlantic run This actual experience with

Flota appears to be a just and reasonable guide of what Consolo

was entitled to for the purpose ofmeasuring his past damages and

it is adopted Respondent s exception on this point is valid

The eleventh exception is found unsupported

The twelfth exception deals with complainant s failure to

minimize damages by using other means of transportation Once

the failure to perform common carrier obligations and exclusion is

shown the burden to show a failure to mitigate the damages was

upon the defendants Hernandez v Bernstein 116 F 2d 849

851 852 2nd Cir 1941 Flota offered no such proof other than

a suggestion that chartered ships might be used but no suitable

ones were shown to be available Respondents have failed to show

any mitigating factors

Exception fourteen relates to the examiner s subsidiary findings

offact on which the award ofreparations is based None is shown

to be wrong and all have been fully established in this docket

The fifteenth exception likewise assumes the untenable premise

that discriminatory and perferential conduct did not exist until

after the Board s decision on Consolo s complaint against Flota

and that the contract which caused such conduct excused the dis

regard of statutory obligations

The sixteenth exception is unsupported by the record

The eighteenth and nineteenth exceptions relate to the ascertain

ment of damages Complainant submitted extensive evidence of

lost profits in the form of schedules of about 226 individual voy

ages between 1955 and 1959 showing for each voyage the number

of banana stems actually carried by named ships on specified

dates between Guayaquil Ecuador and Philadelphia Penna

with the exception of two ships which discharged at Charleston

S C and Baltimore Md respectively because of a strike at

Philadelphia Penna In the absence of other proven data and of

any disproof of the complainant s data or challenge of complain

ant s

figures such dat and figures have been used in the compu

tation of reparations found to be due

The complainant s profit per stem of bananas is the difference

in cost at Guayaquil and the value or sale price at Philadelphia

which is taken to be the total gross profit per stem This amount

6 F M B
274 FEDERAL MARITIME BOARD

has been multiplied by the number of stems on each ship

and the products added to get the gross profit From such 

gross profit there has been deducted 1 the total freight 

and 2 the total estimated cost of handling the banana

Philadelphia The latter amount is 50 15 cents a stem 35 

for stevedoring plus 3 for overhead plus 12 for insectic

rope and bags multiplied by 1 061 286 stems carried during 

reparation period Complainant did not show the 3 a stem 

duction for overhead in its claim but this amount was dedu

by the examiner with the subsequent admission by the comp

ant that it was a proper amount The examiner s computa

was also based upon the use of New York instead of Philade

stevedoring costs and omitted the deduction of the estim

incidental costs of handling bananas at Philadelphia in the am

of 12 cents The latter figure was also furnished by complain

Based upon the shipment of 1 061 286 stems of bananas o

voyages between August 23 1957 and July 12 1959 the us

the complainant s statement of profits per voyage tota

2 513 236 43 on all voyages allowed and the subtraction th

from of total freightin the amount of 1 204 343 95 and incide

costs in the amount of 532 234 93 as proven by complainan

find the remainder is the proper net profit of 776 657 55 Co

is entitled to 1846 of the net profit An award is hereby m

and shall be paid to complainant Philip R Consolo of 4425 N

Michigan Avenue Miami Beach Florida on or before 60 

from the date hereof in the amount of 143 370 98 with inte

at the rate of 6 per annum on any amounts unpaid afte

days as reparation for the injury caused by respondent s viola

of Sees 14 and 16 of the Shipping Act 1916 as amended

6 F 
PHILIP R CONSOLO v FLOTA MERCANTE GRANCOLOMBIA 275

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 28th day of March 1961

Nos 827 827 sUB I

PHILIP R CONSOLO

V

FLOTA MERCANTE GRANCOLOMBIANA S A

This Jroceeding being at issue upon complaint and answer on

file and having been duly heard and submitted by the parties and

full investigation of the matters and things involved having been

had and the Board on the date hereof having made and entered

a report stating its findings of fact conclusions and decisions

thereon which report is hereby referred to and made a part

hereof

Itis Ordered That respondent Flota Mercante Grancolombiana

S A be and it is hereby notified and directed to pay unto com

plainant Philip R Consolo of 4425 North Michigan Avenue

Miami Beach Florida on or before 60 days from the date hereof

143 370 98 with interest at the rate of 600 per annum on any

amounts unpaid after 60 days as reparation for the injury caused

by respondent s violation of Sees 14 and 16 of the Shipping Act

1916 as amended

By the Board

Sgd THOMAS LISI

SeC1 eta1Y

6 F M B

732 047 0 64 19
MARITIME ADMINISTRATION

No S 123

THE OCEANIC STEAMSHIP COMPANY

ApPLICATION UNDER SECTION 805 a

Decided March 31 1961

The Oceanic Steamship Company should be granted written permIS

under Section 805 a of the Merchant Marine Act 1936 as amen

to permit its parent company Matson Navigation Company to ch

the latter s owned SS HAWAIIAN BANKER to Pope Talbot 

for a period of from 2 to 4 months for operation in the interco

service such charter period to commence on or aJout April 1 1961 

granting of such permission found 1 not to result in unfair com

tion to any person firm or corporation operating exclusively in 

coastwise or intercoastal trade and 2 not to be prejudicial to 

objects and policy of the Merchant Marine Act 1936 as amended

Willis R Deming and Alvin J Rockwell for applicant

J Alton Boye1 for Pope Talbot Inc

RickaTd W KUtTUS for Isbrandtsen Company intervener

SteTling F Stoudenmi1 e J1for vVaterman Steamship Corpo

tion intervener

William JaTel Smith as Public Counsel

REPORT OF THE ADMINISTRATOR

THOS E STAKEM MaTiti meAdministTator

The Oceanic Steamship Company filed an application 

written permission under Section 805 a of the Merchant Ma

Act 1936 as amended 46 D S C 1223to permit its pa

company Matson Navigation Company to charter its ow

C2 type ship the SS HAWAllAN BANKER to Pope Tal

Inc for operation in the Intercoastal Service for a period 

276

6 1 
OCEANIC STEAMSHIP CO SEC 805 a APPLICATION 277

from 2 to 4 months such charter period to commence on or about

April 1 1961 The application was duly noticed in the Federal

Register of March 24 1961 26 F R 2536 Waterman Steam

ship Corporation Waterman and Isbrandtsen Company Inc

Isbrandtsen intervened in opposition to the granting of the

requested permission and hearing was held on March 30 1961

Subsequent to the hearing Isbrandtsen Company withdrew its

opposition to the granting ofthe permission

The Administrator on March 31 1961 also received a com

munication from Waterman waiving its right to file exceptions

and stating that Waterman will not object to the initial decision

becoming final In view of these cited circumstances the ex

aminer s initial decision is hereby adopted as the decision of the

Administrator

This report will constitute the written permission required

6 M A
FEDERAL MARITIME BOARD

No S 65

LYKES BROS STEAMSHIP CO INC AND BLOOMFIELD STEAM

COMPANy ApPLICATIONS TO EXTEND SERVICES ON TRADE RO

No 21

Decided May 5 1961

Service already provided by vessels of United States registry from 

Gulf ports other than Tampa Port Tampa and Boca Grande is in

quate and in the accomplishment of the purposes and policy of 

Merchant Marine Act 1936 as amended additional vessels shou

operated in service between these ports and East Coast U K Conti

Section 605 c of said Act is no bar to granting of applications of L

Bros Steamship Co Inc and Bloomfield Steamship Company fo

tension of service in said trade

John Mason and AndTe W A Nonnandeau for Applicant Blo

field Steamship Company

WalteT Ca1Toll and Odell KomineTs for Applicant Lykes B

Steamship Co Inc

M C Cunningham and L A PaTish for Intervener Alab

State Docks Department

Sterling F Stouden1ni1 e Jt

for Intervener Waterman Ste

ship Corporation

Robert E Mitchell EdWaTd AptakeT and Wm Ja rrel Sm

J1 Public Counsel

REPORT OF THE BOARD

THOS E STAKEM ChaiTman SIGFRID B UNANDER V ce

Chainnan RALPH E vVILSON MembeT

By THE BOARD

1 PROCEEDINGS

B letter dated July 19 1955 Lykes Bros SS Co Inc Lyk

applied for permission to provide service from East Gulf Gu

278

6 F M 
LYKES BROS S S CO INC AND BLOOMFIELD S S CO APPLI 279

Mexico Ports Port St Joe Gulfport Range both inclusive to

the East Coast United Kingdom and Continent and in the event

the application is approved requested an addendum to its Oper

ating Differential Subsidy Agreement to cover the extension of

its B 2 Service to include East Gulf Ports in the loading and dis

charging area for its ine B 2 ships By letter dated June 26

1958 Lykes amended its application to request that the United

States area on Lykes Line B 2 Trade Route 21 Freight Service

No 2 be described as Between United States Gulf ports Key

West Mexican Border

By letter dated August 11 1955 Bloomfield SS Co Bloomfield

stated that it was willing to undertake 8 sailings a year serving

the East Gulf if the other subsidized operator will furnish 16

sailings for East Gulf ports and will in the future comply with

subsidy contract requirements by coordinating its sailings with

ours By letter dated September 23 1955 Bloomfield expressed

its belief that the port of Mobile is not being furnished adequate

service By letter dated October 13 1955 the letter of applica

tion was supplemented by asking that our request for an increase

in our annual subsidized sailings be acted upon independently

ofour intention to serve Mobile

Watennan SS Corp Waterman and the Alabama State Docks

State Docks intervened Hearings were held and briefs filed

followed by a recommended decision by an Examiner served De

cember 23 1960 Exceptions and replies have been filed Oral

argument was scheduled for March 21 1961 when the parties

appeared and waived argument

II FACTS

Trade Route No 21 U S Gulf United Kingdom and Continent

covers service between ports in the U S Gulf of Mexico ports from

Key West Florida to the Mexican border and ports in the United

Kingdom Eire and Continental Europe North of PortugaL The

Administrator determined that U S flag sailing requirements on

Trade Route No 21 are 13 to 15 per month One to two sailings

are on Service No 1 to the west coast of the United Kingdom and

Eire and 12 to 13 sailings are on Service No 2 to the East Coast

United Kingdom and Continental Europe North of Portugal It

has been found that the C 2 ships now operated on this route are

suitable and efficient ships for operation on Trade Route 21 and

that 26 to 30 freighters of this type are required to provide ade

quate U S flag service The primary U S flag operators on this

6 F M B
280 FEDERAL MARITIME BOARD

route are Bloomfield Lykes Waterman and States Marine Lin

Inc States Marine Lykes is a party to an Operating Diff

ential Subsidy Agreement with the U S Contract No FMB 5

which authorizes service on Route 21 a between U S Gulf po

Key West Mexican Border and ports on the west coast of 

United Kingdom including Northern Ireland and Ireland 

public of with the privilege of calling at ports in the West Ind

and on the east coast of Mexico b between U S Gulf po

west of but not including Gulfport Miss and ports on the e

coast of the United Kingdom and Continental Europe with p

missive calls at Tampa Port Tampa and Boca Grande Fla

Bloomfield is a party to an Operating Differential Subs

Agreement with the U S Contract No FMB 27 which auth

izes service on Tr de Route 21 between a U S Gulf Port or po

west of but not including Gulfport Miss and a port or po

on the East Coast of the United Kingdom and or a port or po

in Continental Europe north of but not including Bordeau

including Baltic and Scandinavian ports with the privilege of c

ing at Tampa Port Tampa Boca Grande and ports in the W

Indies and Mexico

East Gulf Ports are Mobile Ala Gulfport and Pascagou

Miss and Pensacola Panama City Tampa Boca Grande and P

Tampa Fla These ports are not involved since applicant Ly

may now make permissive calls at such ports and applicant Bloo

field has the privilege of calling at such ports pursuant to th

respective operating differential subsidy contracts At the pres

time neither applicant furnishes regular subsidized service to 

other East Gulf Ports The ports of Mobile Ala Gulfport 

Pascagoula Miss and Pensacola and Panama City Florida 

the subjects ofthese applications

At the present time Waterman and States Marine also oper

on Route 21 but without operating differential subsidy contra

Waterman the intervenor currently makes regular calls 

Mobile Ala and Tampa Fla Since 1954 it hHs averaged appr

mately 32 sailings annually It called at Mobile outbound 

average of 22 times per year during the period 1954 through f

half of 1958 at Panama City 6 5 times per year and at Pensac

once in 1954 Between July 1949 and July 1957 it provided 

service from the Gulf to United Kingdom ports chartered ves

to other operators on numerous occasions and resigned from 

Gulf U K Conference in 1950 rejoining in 1957 after its subs

application was filed In 1957 States Marine had a sailing fr

6 F M 
LYKES BROS S S CO INC AND BLOOMFIELD S S CO APPLI 281

the Gulf to Antwerp and Bremerhaven approximately every two

months Its service since if any is not of record

There are eleven foreign flag lines ten if two lines providing

joint service are counted as one operating on Trade Route 21

each of which serves both East Gulf and West Gulf ports the

latter predominantly Four of these lines call regularly at East

Gu lf ports other than Tampa and principally at Mobile Ala

Foreign flag lines se ving Mobile provided twice as many sailings

as U S flag vessels 1958 1959 and carried four times as much

liner commercial cargo outbound and inbound 1953 1958 There

is only one U S flag line Waterman operating in the East Gulf

except the privilege ports

Commercial cargoes carried ill liner service between the East

Gulf ports excluding Tampa Port Tampa and Boca Grande and

Continental Europe north of Portugal to the Danish border and

including the English coast and channel ports for the years 1953

1958 provided almost exclusively by Waterman was a total

average of 24 88 percent outbound and 37 11 percent inbound

Phosphate rock is the principal export from the excluded ports

From the excluded ports which originate about 70 percent of all

liner cargo from East Gulf ports and which are served by Lykes

but not by Bloomfield the total average U S flag participation

between 1953 and 1958 was 6127 percent outbound and 29 61

percent inbound From the entire East Gulf including Tampa

Port Tampa and Boca Grande U S flag participation was 5117

percent outbound and 32 38 percent inbound during the 1953 1958

period Participation in the outbound movement dropped from

51 15 percent in 1957 to 34 97 percent in 1958 when Lykes cur

tailed its calls at Tampa Port Tampa and Boca Grande

The free space Le not utilized during the period 1957 1959

of Lykes and Bloomfield averaged approximately 6 percent of

cubic capacity Waterman in 1959 had deadweight capacity for

an additional 66 000 tons of cargo and utilized 69 percent of its

cubic capacity

The records showed that outbound liner tonnage from East

Gulf Ports to the East Coast of the United Kingdom and to the

Continent had increased from 339 470 long tons in 1955 to 465 103

long tons in 1957 with a setback in 1958 to 393 586 long tons

Liner carriage of bulk commodities influences this traffic

American flag participation in bulk cargo carriage is very small

in comparison with foreign flag participation In 1957 U S flag

6 F M B
282 FEDERAL MARITIME BOARD

ships carried 25 474 tons while foreign ships carried 74 561 t

Defense cargo is a very small part of total outbound tonnage

Factual data in exhibits prepared by the Maritime Adminis

tion Staff showed U S flag carriage in liner commercial traffi

East Gulf ports inbound declining fr0111 42 93 percent in 195

20 26 percent in 1958 and outbound declining from 52 65 per

in 1953 to 34 97 percent in 1958 after reaching a high outbo

of 60 71 percent in 1954 and 60 85 percent in 1955 A compar

of inbound and outbound tonnage shows that exports exceed 

ports by a 3 to 1 ratio

For the East Gulf trade U S flag liner participation for the 

years of record 1953 1958 exceeded 50 in all but two y

1956 and 1958 U S flag participation averaged more than 5

outbound during the entire period Cargo carried between E

Gulf ports excluding Tampa Port Tampa and Boca Gran

and Europe by U S flag liners has been well below 50 outbo

and except for 1954 below 5000 inbound during such six years

The decline in U S flag participation on the entire rout

explained to some extent by the fact that Lykes curtailed its p

phate movement from Tampa the largest traffic generating 

and the commodity providing the largest tonnage making up 

statistics Lykes also reduced its calls at Tampa for loa

of the predominant commodity available to liners on the E

Gulf coast because the rates were not attractive for carry

phosphate rock Lykes was responsible in part for the declin

U S flag liner participation figures or percentages for the r

as awhole

Vith regard to the ports which may be served the follow

additional specific facts are found

Mobile Waterman concedes that U S flag service to Mobi

inadequate Mobile is the most important port on the East 

as far as general cargo is concerned U S flag carriage of 

bound general cargo at Mobile declined from 4800 in 1953 to 

in 1958

Gulfpo1t Witnesses testified as to industrial growth in 

city as offering prospects for added service

Panama City In 1958 approximately 32 000 tons of c

moved outbound compared with only 4 800 tons for all other 

Gulf ports except Mobile and Tampa For the years 1953 

U S flag participation outbound was 53 in 1958 U S flag 

ticipation was 52 in liner commercial cargo There is an 

panding paper mill industry at Panama City

6 F M 
LYKES BROS S S CO INC AND BLOOMFIELD S S CO APPLI 283

Pas cag0 ulaThere are fertilizer and chemical plants at this

city The traffic director of Lykes testified they have had general

requests from this port regarding inauguration of service with

respect to these plants This testimony is somewhat supported by

other testimony that cargo figures for the route have been better

in the last 6 months ofrecord

III DISCUSSION

We recently found service on Trade Route No 21 is inadequate

and in the accomplishment of the purposes and policy of the Act

additional ships should be operated thereon Waterman Steam

ship Corp Application for Operating Differential Subsidy Sec

605 c Issues Only 5 FMB 771 1960

Since the present proceeding applies only to the East Gulf por

tion of Trade Route No 21 the issues in this proceeding will be

to determine if there is any inadequacy at the present time on such

route particularly at the East Gulfports

The Lykes Bloomfield applications request additions to existing

service on a route serviced by intervenors Waterman and by

States Marine citizens of the U S using vessels of U S registry

and request amendments to applicants operating differential

subsidy contracts for such purpose

Section 605 c of the Act provides that no contract shall be

made under this title Title VI Operating Differential Subsidy

with respect to vessel to be operated on a service route or line

served by citizens of the U S which would be in addition to the

existing service or services unless the Commission Board shall

determine after proper hearing of all parties that the service

already provided by vessels of United States registry in such

service route or line is inadequate and that in the accomplish

ment of the purposes and policy of this Act additional vessels

should be operated thereon

In Bloomfield Steamship Company Subsidy Routes 13 and 21

4 F M B 305 317 318 1953 the Board stated that

the adequacy of services under consideration in section 605 c is adequacy

of berth or liner service on the particular trade route in question What

may be considered adequate United States flag service on one route may be

quite inadequate on another The standard of adequacy must be consistent

with the realities of each particular route and with the purposes of the Act

T he United States flag service on Trade Route 21 must be deemed

inadequate unless dependable United States flag liner sailings are available

sufficient to carry at least one half of the outbound commercial cargo that

may be expected to move in liner service

6 F M B
284 FEDERAL MARITIME BOARD

Past inadequacy on the route has been demonstrated by the f

that American flag ships carried approximately 25 of the o

bound and 37 inbound commercial cargo from the ports in is

and that only Waterman has operated on this portion of Route 

21 according to schedules prepared by the Maritime Administ

tion staff and put in the record American flag participation 

the route has also declined recently Applicants propose to 

at East Gulf ports with available space on their ships An incre

of available space on American flag ships will give these E

Gulf ports the benefit of more adequate service Witnesses te

fied that exports on liners should increase moderately over 

next few years and have already increased somewhat since 1

the last year for which figures are available

The most valuable guide to measure adequacy of service in 

future is necessarily adequacy of service in the past modified 

such extent as may appear justified by the best available ju

ment as to what the future may have in store Bloomfield SS 

Subsidy Routes 13 1 and 21 5 4 F M B 305 1953

The record shows that Amercian flag carriers are not the pri

pal carriers of exports any longer in this area Ifthere is to 

an increase American flag ships should be available to shar

the development The future increases while inevitably spec

tive seem to be based on tangible factors of industrial expans

supported by some shipper demand for present service

The above is consistent with the examiner s decision with w

we concur

The intervenor Waterman has excepted to the following f

ings in the recommended decision of the examiner

1 that there a e 11 foreign flag lines operating on Trade Ro

21 each of which serves both East Gulf and West Gulf ports

2 that support for Lykes East Gulf service comes from Ge

H MacFadden Bros for a service from Mobile to French p

and Military Sea Transportation Service for the entire Ly

application

3 that there should be an increase in the future in traffic f

East Gulf areas

4 that Tampa Port Tampa and Boca Grande should not be 

cluded in determining adequacy or inadequacy of service for 

East Gulf

5 that applicants would have sufficient free space for additio

service to and from East Gulf ports

6 F M 
LYKES BROS S S CO INC AND BLOOMFIELD S S CO APPLI 285

6 that U S flag service from East Gulf ports other than Tam

pa Port Tampa and Boca Grande is inadequate and that additional

vessels should b operated in the service between said ports and

East Coast United KingdomContinent in the accomplishment of

the purposes aI1d policy ofthe act and

7 that Sec 605 c is not a bar to the granting of the applica

tions involved in this proceeding

Waterman also excepted to the failure to find the U S flag

service atPanama City is adequate

The first exception involved no material facts since it depends

on the method of counting the number of lines in this service

Moreover the presence of American flag vessels on the route is

the determinative factor for showing adequacy or inadequacy of

service not foreign lines

The second exception is supported by an allegation that support

ing letters were admitted in evidence instead of direct testimony

and that the letters are hearsay evidence Administrative agencies

customarily accept letters of this type

The third exception is also a contention that the testimony of

Lykes witness as to expansion of industrial activity is hearsay

The Examiner gave this appropriate weight along with other

evidence

The fourth exception protested the exclusion of three of the

Florida ports in considering inadequacy Lykes and Bloomfield

currently have authority to call at these ports as well as other

ports on Trade Route No 21 Under such circumstance we hold

that adequacy of U S flag service should be co extensive with the

service proposed

The fifth sixth and seventh exceptions either repeat prior ex

ceptions or involve matters covered in the opening reply briefs

In any event the Examiner found persuasive evidence that Lykes

has sufficient space for the proposed service and that both Lykes

and Bloomfield proposed to serve an existing inadequacy

The final exception is essentially to the Examiner s formula for

determining inadequacy of service to the East Gulf ports in ques

tion and is a claim that adequacy should be examined port by port

Since inadequacy of service to all the remaining East Gulf ports

is in issue it is eone1uded that the Examiner properly determined

the issue on the only relevant basis which was the application

itself Panama City need not be considered alone but as a part

of the remaining range of ports in the East Gulf area In Ameri

can President Lines Calls Round the World Service 4 F M B

6 F M B
286 FEDERAL MARITIME BOARD

681 1955 applicants served New York and Boston within 

East Coast Range and proposed to call at other ports within 

range The Board held that adequacy was to be considere

conjunction with the applicant s proposed service and exclu

cargo data applicable to New York and Boston The Board fo

there was inadequacy of service at the remaining ports of P

delphia Baltimore and Hampton Roads The situation is sim

to this one

The finding of inadequacy by inference answers affirmat

the issue of whether in the accomplishment of the purposes 

policy of the Act additional ships should be operated in the s

ice in question and disposes of any question of undue preju

against the existing operator We conclude that Sec 605 c 

no bar to the granting ofthe applications in question for exten

ofservice in said trade

Ii F M 
FEDERAL MARITIl1E BOARD

No 815

COMMON CARRIERS BY WATER STATUS OF EXPRESS COMPANIES

TRUCK LINES AND OTHER NON VESSEL CARRIERS

Decided June 1 1961

Status of respondents Weaver Bros Inc and Railway Express Agency

determined in accordance with Report served March 3 1961

SUPPLEMENTAL REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER Vice

Chai1 man RALPH E WILSON Membe1

BY THE BOARD

The Federal Maritime Board on March 2 1961 decided that

certain trucking companies freight forwarders and express com

panies might be classified as common carriers by water pursuant

to the Shipping Act 1916 as amended Act and to the Inter

coastal Shipping Act 1933 as amended Intercoastal Act Two

of the respondents Railway Express Agency Inc Railway Ex

press and iTeaver Bros Inc iTeaver were found not to be

classifiable as common carriers by water

The proceeding was held open as to Railway Express so that

further proofs in the form of briefs or oral argument might be

received and considered by the Board Railway Express sub

mitted on April 3 1961 a petition for reconsideration of our

order of March 2 in relation to its status as a common carrier by

water and incorporated therein a supplement to Official Express

Classification 36 containing ratings rules and regulations apply

ing on express traffic covered by tariffs issued subject thereto

Supplement 23 issued August 19 1960 and effective September

26 1960 and the Board was also infonned that the Railway Ex

press Agency Uniform Through Export Bill of Lading Form

287

6 F M B
288 FEDERAL MARITIME BOARD

2100 had been revised effective May 1 1960 Both docume

show that Railway Express assumes full common carrier liab

from origin to destination based on the value of property ship

as declared by the shipper and certain limitations on liability c

tained in the bill of lading placed in evidence in the original p

ceeding have been eliminated Based on the above filed docume

we find that effective May 2 1961 respondent Railway Expr

is included within the classification of motor carriers freight f

warders and express companies which are common carriers 

water within the meaning of such term in the first section of 

Act

iTeaver submitted a late filed motion for leave to file a petit

for reopening under the Board s Rules of Practice and Proced

At the same time and without waiting for leave to be granted 

petition vas filed For Reopening For Leave to Supplement 

Record and FOl Reconsideration 1e hereby accept the petit

The petition is in the form of a brief containing arguments 

exhibits showing that Veaver may be a common carrier by wa

within the Board s test The principal exhibits are revised pa

of Weaver s tariff modifying eaver s bill of lading form ef

tive April 28 1961 to eliminate the provisions of disclaime

liability that were held to preclude vVeaver from being a comm

carrier by water Based on the above filed documents we find t

effective May 2 1961 respondent iTeavel is included within 

classification of motor carriers freight forwarders and expr

companies vhich are common carriers by water within 

meaning of such term in the first section of the Act

6 F M 
FEDERAL MARITIME BOARD

No 868

MISCLASSIFICATION OF DIATOMACEOUS OR

INFUSORIAL EARTH AS SILICA

Decided June 1 1961

Shipper and forwarder respondents found not to have knowingly and will

fully by means of false classification obtained transportation by water

for diatomaceous silica from New Orleans La to European and South

African destinations at less than the rates or charges which would

otherwise be applicable in violation of the first paragraph of Sec 16 of

the Shipping Act 1916 as amended

Carrier respondents found not to have allowed shippers and forwarders to

obtain transportation for diatomaceous silica from New Orleans La to

European and South African destinations at less than the regular rates

or charges then established and enforced on the line of such carriers by

means of false classification in violation of the second paragraph of

Sec 16 of the Shipping Act 1916 as amended

James A Thomas Jr and Herbert Morton Ball for respondent

Johns Manville International Corporation

Frederick G Poetet for respondent Great Lakes Carbon Cor

poration

Walter Cart oll for respondent Lykes Bros Steamship Co Inc

Morton Zuckerman for respondents Baron Iino Line and U S

Navigation Co Inc

Robet tE Mitchell Edwat d Aptaker and Robert J Blackwell

as Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER Vice

Chait man RALPH E WILSON Member

BY THE BOARD

IPROCEEDINGS

The Board by an order of September 3 1959 supplemented

October 30 1959 24 F R 8977 No 216 November 4 1959 in

289

6 F M B
290 FEDERAL MARITIME BOARD

stituted an investigation as authorized by Sec 22 of the Ship

Act 1916 as amended Act to determine whether a miscla

fication of infusorial or diatomaceous earth as silica had occu

in violation ofSec 16 of theAct

The following parties were made respondents

1 Great Lakes Carbon Corporation and its subsidiary F 

Berk and Company Inc Great Lakes a shipper of diatomace

silica also called diatomaceous or infusorial earth 2 Jo

Manville International Co Johns Manville a shipper of di

maceous silica 3 Mattoon and Company Inc Mattoon 

forwarder for the shipper Great Lakes 4 H P Lambert C

pany Inc Lambert a forwarder for the shipper Johns Manv

5 Aktiebolaget Svenska Amerika Linien Swedish Amer

Line Wilhelmsen Line Joint service of Wilhelmsens Damps

saktieselskab Wilhelmsen Zim Israel America Lines J

service of Zim Israel Navigation Co Ltd Zim Lykes B

Steamship Co Inc Lykes Baron lino Line Baron comm

carriers by water which transported the aforesaid prope

6 Strachan hipping Co Strachan agent for the common 

riers Swedish American Zim and Lykes and 7 U S Naviga

Co Inc Navigation agent for Baron

Hearings were held before an Examiner who in a recommen

decision found 1 that respondent shippers and freight 

warders have falsely classified and billed shipments of diato

ceous earth in violation of the first paragraph of Sec 16 of 

Act 2 that respondent steamship lines have not violated 

second paragraph subparagraph Second of Sec 16 of the 

Exceptions to the recommended decision were filed followed 

oral argument

II FACTS

Great Lakes is the manufacturer of a high speed filte

product which has the basic trade name of Dicalite an

marketed under a

variety of other trade names such as Dica

Speedflow Dicalite Superaid Dicalite Speed Plus Speed

and Dicalite 4200 Johns Manville is also the manufacture

the same product which is marketed under the trade names 

Celite Super Cel Hyflo Micro Cel and Filter Cel

Both shippers obtained the raw materials for these prod

6 F M 
MISCLASSIFICATION DIATOMACEOUS EARTH AS SILICA 291

from openpit mines of diatomaceous silica located at Lompoc

Calif The raw material is mined by Inachinery conveyed to a

processing plant mechanically pulverized drieeJ ll1cl packed in

bags for shipment Neither the pulverizing nor the drying changes

the chemical nature or the prod uet The bags bear the h ade names

noted above The packaged product is in all respects the same as

the product fresh from the mine except for the elimination of

water in the drying process

The product was shipped by railroad from Lompoc Calif to

New Orleans La subject to inland bills of lading describing it as

a specified number of bags infusorial earth ground or abbrevi

ations of these words

The packaged product has a low density which gives it a stow

age factor of from 150 cu ft to 160 cu ft per ton while silica in

crystalline state or in the form of sand stows at 35 cu ft to 40

cu ft pel ton The amorphous character of the product as dis

tinguished from the crystalline character of silica in sand form

causes this difference in their densities

Between January 1958 and September 1959 each shipper made

about 110 shipments on ships of the respondent common carricrs

by water from New Orleans La to ports in Europe South Africa

and the Mediterranean area

Great Lakes by its forwarder Mattoon described its shipments

as follows in bills of lading of the designated carriers uncleI thc

heading Particulars Furnished by Shipper of Goods and under

columns headed Marks and Numbers and Description of Pack

ages and Goods subject to changes in the number of bags

Swedish A 1ner len11 Line

DICALITE Superaid Special Speedflow Speedex Speedplus

604 BAGS SILICA

Ba1 011 1111 0 Line

DICALITE Speedplus

400 BAGS SILICA

Johns Manville by its forwarder Lambert described its ship

ments as follows with changes in the number of bags in bills

of lading of the carriers uncleI the san1e headings

G F M B
292 FEDERAL MARITIME BOARD

Swedish American Line

HCELITE 281

86 BAGS SILICA

Baron Iino Line

tlHYFLO

2000 BAGS POWDERED SILICA BAGS

Lykes Bros Steamship Co Inc

MATERIAL 432 BAGS JM CELITE white label 545

432 pink label 503

432 STANDARD SUPER CEL

green la

1296 SILICA

The forwarders Mattoon and Lambert prepared all of 

shippers bills of lading containing the allegedly false classif

tions The bills of lading were prepared in accordance with w

ten instructions from the respondent shippers The instructi

were in the form of a letter transmitting listed documents 

specifying the particulars to be followed in handling the shipln

including the name of the consignee the destination and the 

of lading description Great Lakes letter of instructions wa

the form of a memorandum under its letterhead addressed to 

forwarder and over the signature of its traffic manager The 

structions specified the name of the ship the sailing date and 

port of discharge The following is a typical example of 

instruction as to the bill of lading description No of bags 

Commodity SILICA Opposite Special Instructions is writt

Note Commodity Description Other details such as wei

marks and numbers and the documents enclosed are also wri

in the instructions The instructions by Johns Manville are in 

form of a letter under its letter head addressed to the forwar

over the signature of its traffic manager or his designee G

erally similar information is contained in the letter and oppo

the words Bill of Lading Description is written SILICA 

SILICA EXP DEC SILICA CELITE TRADEMARK 

Powdered Silica in Bags The forwarders at the time of 

paring the bills of lading also had delivery and approval not

from the inland rail carriers describing the products as Diato

ceous or Infusorial Earth The forwarders did not solicit ad

of the carriers involved as to the proper classifications un

requested to do so by the shipper They did not question the v

6 F M 
MISCLASSIFICATION DIA TOMACEOUS EARTH AS SILICA 293

ance in the descriptions Their witnesses testified variously We

are not one to question our shippers as to how to describe their

shipments and that in this particular transaction they were Hlike

a clerk and were only doing Hexactly what we were told or were

facilitating the handling of paper Hby being able to sign on their

shippers behalf

In its statement of facts the shipper Great Lakes asserted that

the respondent freight forwarder who acted on behalf of Great

Lakes did so in accordance with its instructions and Great Lakes

assumes complete responsibility for these instructions for the acts

of the forwarder in preparing the documents and delivering them

to the carriers

On bills of lading of Zim Hellenic and Fern Ville lines the

products were described as Infusorial Earth Powder

The tariff descriptions rates and regulations used as a source

of the rates to be applied to the bill of lading descriptions are

those of the Gulf French Atlantic Hamburg Range Freight Con

ference Gulf Continental Tariff No 7 The Gulf South East

African Conference The Gulf United Kingdom Conference The

Gulf Mediterranean Ports Conference and The Gulf Scandinavian

and Baltic Sea Ports Conference The rates for diatomaceous

silica and for silica are on different pages of the book because

the commodities are listed alphabetically The classifications read

typically as follows

Gulf Continental Tarifj No 7 Page 39

A G R A H B

Earth Viz

Diatomaceous

Fullers See Clay Infusorial

2 20

2 20

2 35

2 35

Page 128

Silica Apply Sand Silica Rate Flour

Apply Sand Silica Rate Sand

See Sand Silica

Page 121

Sand Viz

Silica or Quartz 125 1 40

6 F M B
294 FEDERAL MARITIME BOARD

Gulf South East African Tariff No 6

Cape

Town

Basis

Mombasa

Tanga

Zanzibar

Dar es

Salam

Pag

Tamat

Majun

Port L

Pointe 

Gale

Earth Diatomaceous 70 50W 74 50W 82 0

Earth Infusorial 70 50W 74 50W 82 0

Pag

Silica

Silica Sand See Sand Silica

3150W 35 50W 50 50

Pag

Sand Alumina Flint Green

Mineral Sand Silica

in drums

39 25W 43 25W 52 00

The above are fairly typical of the choices that vould have b

available to the shippers if the tariff book had been given to t

for examination Later in 1959 after this dispute arose the tra

were revised by adding a measurement factor to the informa

under each classification For example the Gulf South E

Africa Tariff reads under Earth diatomaceous

Meas up to incl 50 per 2240 28 00W 2240

and over 50 per 2240 50 00W 2240

on the Capetown basis Similar differentials were made in 

other tariffs except the Gulf Scandinavian and Baltic Sea P

Conference tariff which had not been changed as of November 

1959 None of the tariffs have a classification for diatomac 

silica All of the tariffs provide a considerably lower rate 

transporting silica as sand than for transporting diatomace

or infusorial earth

Diatomaceous earth or infusorial earth or diatomaceous s

technically known as diatomite is a hydrous or opaline form 

silica generally about 90 to 96 pure amorphous silica 

inert It is distinguished from silica by the presence of fo

remains of single celled marine organisms known as diato

6 F M 
MISCLASSIFICATION DIATOMACEODS EARTH AS SILICA 295

X ray diffraction pictures were taken of the product and of cristo

balite which is pure silica Si O2 or Silicon Dioxide One picture

showed a broad halo and an almost complete lack of sharp lines

indicating that the material is amorphous or non crystalline This

material was identified as natural diatomaceous earth or diatoma

ceous silica The second picture identified as a sample of cristo

balite shows very sharp lines which characterized the pattern

typical of the crystalline material A third film taken of diato

maceous silica known as Celite showed a pattern which was

identical with the second indicating that it was composed of cris

tobalite Counsel for one of the respondents represented one of

its experts as saying the pattern of pure silica and our product

Celite is the same

The tariffs of the various Conferences were not generally avail

able were not public and the shippers employees never saw

the traiffs and were not freely able to get the tariffs Agents

of the conference carriers verbally advised shippers about rates

in response to inquiries and told the shippers the rates on silica

and diatomaceous earth or infusorial earth after being asked if

they had such a rate

About Apri119 1959 the carrier Lykes through its New York

representatives discussed the silica shipments with the shipper

Johns Manville The carrier said it would not accept cargo de

scribed as silica because of a variance with its export declaration

description as infusorial diatomaceous earth In response the

shipper said it would make other arrangements for shipment The

next day Lykes said it would move the shipment as originally

booked On receiving more information about the product the

carrier advised that it did not contemplate raising any question

as to his the shipper s description on the bills of lading

and the matter now seems to be that we accept Johns Manville

International description of silica

III DISCUSSION

Sec 16 of the Act provides That it shall be unlawful for any

shipper forwarder or any officer agent or employee there

of knowingly and willfully directly or indirectly by means of

false classification to obtain or attempt to obtain transpor

tation by water for property at less than the rates or charges

which would otherwise be applicable

6 F M B
296 FEDERAL MARITIME BOARD

That it shall be unlawful for any common carrier by wa

directly or indirectly

Second To allow any person to obtain transportation 

property at less than the regular rates or charges then establis

and enforced on the line of such carrier by means of f

classification

The shipper classifies the product by the description writte

the bill of lading Here the word Silica was written in bill

lading to describe the product

The product shipped is found to be properly described 

diatomaceous silica diatomaceous earth or infusorial earth 

of which have amorphous characteristics and is not prop

classifiable as silica which is similar to sand in its most comm

form The products were falsely classified as the examiner 

found

Sec 16 is not violated by shippers or forwarders unless 

false classification is knowingly and willfully made The ex

tions to the examiner s conclusions that the false classifica

was knowing and willful are substantially that the tariff 

sufficiently ambiguous as to preclude any precise choice betw

the two tariff descriptions or that it could not be said that 

or the other was completely inapplicable and that the ship

was entitled to select the one giving the lower rate

The Sand silica rates were almost one half the Earth di

maceous rates because of the stowage factor Where both 

modity rates are adequately descriptive the one making the lo

charge is applicable Cone Bros Const1 uction Co v Georgia R 

et al 159 LC C 342 1929 Ambiguities should be resol

against the carriers writing the tariff Rubber Development C

v Booth 8 8 Co et al 2 U S M C 746 748 1945

The significant fact of this case is that the books contain

the written tariff descriptions were not available and request

examine the tariffs at the offices of the Carriers and Conferen

were refused The two respondent shippers and their forward

are not in the position of parties who have the opportunity 

make a visual inspection of the words contained in tariffs wh

are available to the public Misclassification and Misbilling 

Glass Tumblers and other Manufactured Glassware Items as Ja

6 F M B 155 1960 Classification of Paper Products by Ru

Rubin Rubin Corp et al Docket No 848 decided February 

1961 As a result of this lack the shippers and the forward

6 F M 
MISCLASSIFICATION DIATOMACEOUS EARTH AS SILICA 297

could not make up their minds about the proper thing to do on

the basis of an accurate understanding of the tariff

As a result of the unavailability of the carriers tariffs these

shippers could not take the printed descriptions and compare them

with vhat they knew about the characteristics of their products

Instead they had to depend on verbal statements about the tariff

rates for various commodities in response to their inquiries and

t

depend on what meager information the carrier conference

was willing to furnish One of the descriptions furnished by the

carriers was for a silica product or Silica and it was used in

preference to the Earth description To the respondent shippers

who had to rely on verbal statements about the contents of the

tariff the tariff was quite ambiguous in the sense that two inter

pretations were possible for this product The first was based

on its diatomaceous characteristics and the second was based on

its dominantly silica composition The first could reasonably be

rejected because it was not essentially earth to the shippers but

was essentially Silica

The writers of the tariff recognized the existence of an ambi

guity also when they decided to apply a stowage factor to the

earth classification From the carriers point of view the amount

of space a product takes and its weight is far more important

than labels They recognized that both earth and silica had

stowage problems and eventually applied the same rate to each

depending on volume in order to eliminate the freight rate con

sequences ofthe ambiguity

There is no justification for holding that the earth classifica

tion at least as presented to these shippers by the carriers is so

clearly right and the other wrong that willful and knowing intent

to misclassify is the only fair conclusion Continental Can Co v

United States of Ametica and Federal Maritime Board 272 F 2d

312 316 1959

There was also sufficient confusion about the classification as to

justify the Bureau of Census to authorize the use of a Silica

Celite Trademark description in export declarations as a com

pliance with its Schedule B instructions and at the same time

to use a code number covering Diatomaceous Earth and Prod

ucts Both were thought to be applicable

When these difficulties are joined with the fact that there vas

considerable doubt as to what the product really was in view of

its dominant silica composition the shippers had reason to give

themselves the benefit of any doubt as to which tariff description

6 F M B
298 FEDERAL MARITIME BOARD

should be applied to their product An expert witness testified 

the subject of X ray diffraction patterns of pure s

and of Johns Manville s diatomaceous silica and dem

strated that they were exactly the same as the respond

Johns Manville stated

The shipping instructions given to the forwarders were 

doubtedly given against this background and with a natural de

to obtain the lowest possible freight rate The only available 

formation for the carriers plus the information they had ab

the silica content of the product shipped was such as to cre

enough of an ambiguity in their minds which could be resol

in favor ofthe lower rate

Shippers and forwarders faced with an ambiguity under 

circumstances of this case may not be held to have commit

a misdemeanor by violating the provisions of Sec 16 of the 

covering knowing and willful false classification if they place th

own reasonable interpretation on a tariff which has been m

ambiguous by the publishing carriers actions

Respondents Swedish American Wilhelmsen Zim Lyk

Baron Strachan and Navigation as carriers violate Sec 16 o

if they allow transportation at less than regular rates by means 

false classification An employee of Strachan line manager 

Swedish American and Wilhelmsen admitted that their sh

carried the product described as silica Strachan was presen

with bills of lading booking contracts dock receipts and exp

declarations which all describe the shipments as silica T

inland bills of lading and other papers describing the shipme

as diatomaceous or infusorial earth were not examined 

Strachan There was no discussion about the shipments

Baron and its agents likewise only had documents for exami

tion which describe the product as silica Two days before 

issuance of the supplemental order in this case Baron as

Great Lakes and Mattoon to witness a sampling of the prod

but neither made any representative available Samples w

drawn analyzed and found to be diatomaceous earth Baron 

vised that the shipment would not be loaded unless it was reclas

fied Great Lakes thereafter removed the shipment from the p

Baron did not knowingly allow any misclassified shipments to 

made

There is no evidence in the record that Zim carried any m

classified cargo

6 F M 
MISCLASSIFICATION DIATOMACEOUS EARTH AS SILICA 299

On these facts we find that respondents Swedish American

Wilhelmsen Zim and Baron have not violated Sec 16 of the Act

Respondents Strachan and Navigation were not shown to be com

mon carriers by water and do not come within the terms of the

Act The proceeding is dismissed as to them

The finding that Lykes was not found to have allowed the

shipper to obtain transportation by water for property at less than

the applicable rates then enforced and established by Lykes was

excepted to

The property shipped is a specialized product Its exact char

acteristics must be determined by miscroscopic analysis by trained

scientists to determine its precise classification as either earth or

silica With this difficulty of determining its composition proper

classification is not within the knowledge of the average agent or

employee of the carriers Lykes chief traffic official was concerned

only with establishing a compensatory rate for shipping the prod

uct based on its weight volume and othershipping characteristics

He was confused by the various descriptions ofthe product which

were furnished him and promptly took action to have the product

investigated and the rate adjusted once the confusion had been

brought to his attention A revision of the tariff regulations was

undertaken We don tbelieve that Lykes showed any wanton dis

regard of the duty to exercise reasonable diligence to collect appli

cable rates as to amount to an intent to collect less than the appli

cable charges Practices 0IFabre Line and Gull Mediterranean

Coni 4 F M B 611 1955

To prevent tariffs from being construed contrary to the interests

of the carriers formulating them more care should be taken in

making definitions clear and precisely descriptive of the commodi

ties covered and in specifying the freight rates applicable thereto

In the present case a less confusing tariff description and one

which showed more clearly the difference between earth and silica

as well as prescribing stowage factors as was belatedly done

would have resulted in the assessment of proper charges and eli i

nated ambiguity of descriptions

It is concluded that the carrier respondents have not allowed

shippers and forwarders to obtain transportation for diatomaceous

silica from New Orleans La to Eur opean and South African desti

nations at less than the regular rates or charges then established

and enforced on the lines of such carriers by means of false classi

fication in violation of the second paragraph of Sec 16 of the

Shipping Act 1916 as amended

6 F M B
300 FEDERAL MARITIME BOARD

ORDER

At a Session of the FEDERAL MARITIME BOARD held a

office in Washington D C on the 1st day of June 1961

No 868

MISCLASSIFICATION OF DIATOMACEOUS OR INFUSORIAL EART

AS SILICA

This proceeding having been instituted by the Board upo

own motion and having been duly heard and submitted an

vestigation of the things and matters involved having been 

and the Board on the date hereof having made and entere

record a report containing its conclusions and decision the

which report is hereby referred to and made a part hereof

It is Orde1 ed That this pr ceeding be and it is hereby 

continued

By the Board

Sgd THOMAS LISI

Secreta

6 F 
FEDERAL MARITIME BOARD

No 871

INVESTIGATION OF CERTAIN STORAGE PRACTICES OF PACIFIC FAR

EAST LINE INC TRANS OCEANIC AGENCIES STATES STEAMSHIP

COMPANY AND HOWARD TERMINALS AT THE PORTS OF STOCKTON

AND OAKLAND CALIFORNIA

Decided June 1 1961

Respondents Pacific Far East Lines and States Steamship Company com

mon carriers by water found in conjunction with other persons a to

have given undue or unreasonable preference or advantage to particular

persons localities and descriptions of traffic and to have subjected par

ticular persons localities and descriptions of traffic to undue and un

reasonable prejudice and disadvantage and b to have allowed per

sons to obtain transportation for property at less than the regular

rates or charges then established on the line of such carriers by an

unjust or unfair means in violation of Sec 16 of the Shipping Act

1916 as amended

Respondents Trans Oceanic Agencies as a partnership of two individuals

and Trans Oceanic Agencies Inc and Howard Terminals other persons

subject to the Shipping Act 1916 as amended found to have given

undue or unreasonable preference or advantage to particular persons

localities and descriptions of traffic and to have subjected particular

persons localities and descriptions of traffic to undue and unreasonable

prejudice and disadvantage in violation of Sec 16 of the Shipping Act

1916 as amended

Respondents Pacific Far East Lines and States Steamship Company common

carriersby water found to have failed to establish observe and enforce

just and reasonable practices relating to or connected with the receiving

handling storing or delivering of property in violation of Sec 17 of the

Shipping Act 1916 as amended Just and reasonable practices ordered

enforced

Respondents Trans Oceanic Agencies as a partnership of two individuals

and Trans Oceanic Agencies Inc and Howard Terminals other persons

subject to the Shipping Act 1916 as amended found to have failed to

establish observe and enforce just and reasonable practices relating to

301

6 F M B
302 FEDERAL MARITIME BOARD

or connected with the receiving handling storing or deliveri

property in violation of Sec 17 of the Shipping Act 1916 as am

Just and reasonable practices ordered enforced

John Hays for Pacific Far East Lines Respondent

J Richard Townsend for Albert W Gatov and Warre

Atherton apartnership d b a Trans Oceanic Agencies and T

Oceanic Agencies Inc Respondents

Gilbert C Wheat and H Donald Harris Jr for States St

ship Company Respondent

Gerald H Trautman and William W Schwarzer for Ho

Terminal Respondent

Robert J Blackwell and Edward Aptaker Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER Vice C

man RALPH E WILSON Member

BY THE BOARD

1 PROCEEDINGS

The Board as authorized by Sec 22 of the Shipping Act 

as amended Act 46 U S C 801 et seq by its order 

September 23 1959 24 F R 7839 September 29 1959 upo

own motion entered upon a proceeding of inquiry and inves

tion to determine whether certain storage practices of the P

Far East Line Inc PFEL and Trans Oceanic Agencies T

at Stockton Calif and of States Steamship Co States 

Howard Terminals Howard at Oakland Calif are in viol

of Secs 16 and 17 of the Act

Hearings were held and briefs received followed by a re

mended decision of an Examiner served on December 27 

Exceptions and replies were filed followed by oral argumen

March 22 1961

II FACTS

Respondent PFEL a common carrier by water in the for

commerce of the U S was approached in early 1957 by A

W Gatov a San Francisco businessman with a plan whe

his organization known as Trans Oceanic Agencies w

work tip a distribution arrangement for importers which w

make it economical for them to route shipments via the Po

Stockton The arrangement is more fully described below 

ensuing discussions in about 12 meetings with PFEL s Pres

6 F 
INVESTIGATION OF STORAGE PRACTICES 303

and its General Traffic Manager in the office of the President

resulted in the execution of a Husbanding Agency Agreement

signed by Warren H Atherton a Stockton attorney and partner

in TOA and a PFEL Vice President and a Booking Agency

Agreement signed by the same parties and both dated June 1

1957 The husbanding agency agreement authorizes and appoints

TOA as agent to act as exclusive husbanding agent for the

Principal in Port of Stockton Calif performing only the usual

husbanding activities for principal s vessels Usually husband

ing activities consist of making arrangements for pilots and

tugs to bring a ship up to a dock obtaining entry a d clearance

of a ship by port authorities ordering of work gangs dealing with

problems of manning replacing sick crew members providing

local repairs to a ship and furnishing lines bunkers provisions

stores and dunnage and related work for a ship Compensation

was to be 50 00 for each 24 hours for each vessel of principal

while it is berthed at Stockton with a minimum compensation per

vessel of 150 00 and a maximum compensation per vessel of

250 00 PFEL also agreed to pay all accounts for vessel husband

ing and such other items as may be arranged by the agent and on

request to advance funds to the agent for anticipated charges

For the 33 month period commencing June 1 1957 through Feb

ruary 29 1960 PFEL paid fees of 24 350 00 The fees vere paid

whether or not services were rendered to a specific ship The

record discloses no specific details of any husbanding services

actually performed for and reimbursement or advances by PFEL

A TOA official was unfamiliar with significant details of port

activity at Stockton which a husbanding agent would normally

know The record did not show whether the attorney partner or

the Traffic Manager knew anything about husbanding or did

any such work

The Booking Agency Agreement authorized TOA to develop

solicit procure and book cargoes through its general offices for

the principal s ships PFEL was required to pay 3 of the gross

freight on all inbound general cargo whether booked or not 510

on all outbound general cargo and I1j2 on outbound and inbound

bulk cargo with certain exceptions Total payments were sub

ject to a minimum of 300 00 per month During the same 33

month period PFEL paid commissions on inbound general cargo

of 45 425 05 and on outbound bulk cargo of 23 060 95 plus

1 200 00 in monthly minimums Total payments were 115

158 93 Nothing was paid on inbound bulk cargo

6 M B
304 FEDERAL MARITIME BOARD

PFEL was kept fully informed about TOA activities thr

the receipt of copies of almost all of TOA s solicitation le

during 1958 and 1959 PFEL cargo soliciting agents also w

letters describing the TOA plan to shippers and asked a

sh

if he would consider storing all his cargo free at Stoc

instead of moving these cars to 44 different warehouses and 

drawing on Stockton for the individual LCL less than carl

lots required at the 150 rate and receive store door deliv

Another PFEL letter told TOA that an importer using 

Angeles would bring his cargo to Stockton if the free sto

offsets the trucking charges Stockton Los Angeles An 

change of correspondence between PFEL and TOA sugge

TOA tell an importer how to save money by using Stockto

stead of Seattle as a port because of the availability of 

storage Other correspondence indicates PFEL employees ta

with potential shippers about what was available in Stoc

through TOA activities

TOA was organized in June 1957 as a partnership cons

of Albert W Gatov and Warren H Atherton Wherever T

is referred to herein it shall be taken to refer also to each of 

persons as individuals to the partnership and to the corpor

formed later In February 1959 the parnership became a c

ration with the two former partners as sole stockholders 

violations charged cover both periods

The San Francisco partner was engaged in warehousing a

ities TOA had a Post Office BQx at Stockton and an offic

Stockton which was the same as the office in which one pa

conducted his law practice It had no employees or records o

in this office TOA also has an office in San Francisco wher

only employee the Traffic Manager performed his services w

out stenographic assistance He also worked part of the 

for another company controlled by the San Francisco par

This company has the same telephone number as TOA T

Booking Agency Agreement contained a recital representing 

having offices in Sacramento Madera Milpitas Calif and R

Nev Its stationery also referred to such offices in the letterh

The record shows it had no such offices

The majority of the cargo handled was booked in Japan w

TOA has no cargo solicitors and control of the routing of c

was in persons located east of the Rocky Mountains where 

was not requtred to maintain freight solicitors

6 F 
INVESTIGATION OF STORAGE PRACTICES 305

By letter dated April 30 1957 the President of TOA wrote to

the Director of the Port of Stockton confirming a conversation

informing the Director that the President was undertaking to

act as agent for ocean carriers in the Central Valley area and

am doing business as Trans Oceanic Agencies and offering

to lease on amonthly basis a minimum of 5 000 sq ft of first

class warehouse space within the confines of the Port of Stockton

area The director by letter of May 13 1957 assigned the north

two thirds of Warehouse G comprising 10 300 sq ft on a month

to month basis at a rental of 500 per month The agreement

was verbally revised June 1 1958 to increase the assigned space to

30 000 sq ft and the rent to 1500 00 per month and again

verbally on September 1 1959 to 130 000 sq ft to rent at 3000 00

per month The agreement provides that any services performed

by the Port of Stockton shall be charged for in accordance

with applicable tariffs of the Port of Stockton The rates are

contained in the Port of Stockton Warehouse Division Ware

house Tariff No 1 effective July 1 1949 and as revised from

time to time

TOA solicited the business of shippers by telephone by per

sonal contact and by letter over the signature of its traffic

manager The letters followed a standard pattern and stated

that TOA 1 is an agent for PFEL 2 has warehouse facilities

at Stockton in which the shipper s needs can be accommodated

3 would hold merchandise for the period of time the shipper

required without charge and that this arrangement applied both

to local cargo and to over land common point cargo O C P

cargo 4 would prepare without charge bills of lading on ship

ments from its facilities 5 would furnish prepare and apply

tags at the rate of 614 per tag if required and if the shipper

furnished the tag only a modest charge would be made for apply

ing it 6 would make no charge for movement of cargo from

shipside to storage location and the goods would be stored and

segregated according to the inbound markings and 7 would

extend these arrangements only to cargo carried by PFEL and

discharged at the Port of Stockton The foregoing constitute the

distribution services TOA s solicitation letters contained no

information concerning PFEL s service No mention is made of

the ship size speed transit time loading points schedules accom

modations or any of the other operating details of a carrier s

service TOA s letter did not disclose that it was only a husband

6 F M B
306 FEDERAL MARITIME BOARD

ing and a solicitation agent and was not PFEL s agent as reg

the services it offered to perform

Between December 1957 and March 1960 TOA secure

accounts using the aforesaid services During the period De

ber 1957 to the fall of 1958 free and unlimited storage 

accorded to all customers with charges only for marking tag

stenciling sorting or other accessorial services if they were 

cifically requested by the customer From the fall of 195

September 1959 TOA instituted a 7Y2 service charge per p

age on some cargo but this decision was not put into effect 

away so that on storage provided through 1958 storage 

still rendered free of charge and without time limit During 

9 month period from January 1959 to September 1959 the se

charge was not assessed on cargo in the warehouse at the tim

the inception of the plan it was sometimes levied whether o

the shipper required any service and it was assessed against 

customers but not against others so that some customers 

received free storage From September 1959 to the time o

proceeding in March 1960 TOA assessed a service charge 

package on all cargo using its facilities This practice bega

September 1 1959 shortly after a visit by an investigator 

the Board The charge has varied between customers run

from 2lh to 25 per package depending on different cust

requirements were based on negotiations with customers 

are not related to the length of time goods remain in sto

TOA s booking agency agreement authorizes advertiseme

its services subject to the approval of PFEL and PFEL ag

to reimburse its agent for the expense There has bee

advertising however

TOA obtains custody of shippers goods after unloadin

PFEL s contract stevedores and at the end of Stockton s 7 

free time period or when the goods are moved to TOA s assi

space The moving is done by draymen employed by the Po

Stockton No documents were produced to evidence any tran

of custody or possession to TOA Before April 1959 the Po

Stockton billed TOA for the moving service at the rate of 60 

hundred pounds pursuant to the tariff Since then the Por

absorbed this cost Thereafter stenciling marking inventory 

trol and other services are also performed on goods by port 

sonnel and TOA is billed for such service at tariff rates Stoc

without charge to TOA also provides labor and supervisio

move cargo from the assigned space to connecting carriers 

6 F 
INVESTIGATION OF STORAGE PRACTICES 307

further transportation and prepares bills of lading for TOA cus

tomers Stockton maintains in its administration building the

business records concerning TOA operations TOA has no tariff

or other schedule of rates for its services

The record showed that shipments in TOA custody had re

mained in Port of Stockton warehouses for periods up to 108 days

beyond the normal free storage timE without any special charge to

consignees or shippers for storage Fourteen shipments of earth

enware were shown to have been held an average of 15 days 76

shipments of plywood were held an average of 25 days 78 ship

ments of rattan furniture were held an average of 44 days and 30

shipments oftoys wereheld an ayerage of28 days

The Warehouse Division of the Port of Stockton Tariff contains

rates and regulations for storage including therein rates for the

same services as TOA offered to perform and rules stating how

the rates should be applied Seven days free time is allowed by

Stockton on inbound general cargo Thereafter monthly storage

and storage handling rates apply on various descriptions of com

modities and packages These facilities and services were avail

able at the Port of Stockton for all shippers TOA s practice was

to order handling services in response to shippers instructions and

to pay Stockton for them at the established rates as required by its

agreement with the Port Director

TOA services for consignees were referred to in the record by

one shipper as an offer of warehousing at a fantastically low

figure in fact it would be cheaper to use Stockton than to use his

own company warehouse

One toy shipper had portions of 11 shipments in TOA facilities

The shortest storage period on any of these was 53 days and the

longest about 5 months

A shipper paid since August 1959 7lj2 per carton for marking

segregation and storage of goods This is one and one quarter

cents more than tagging charges alone and comparable services in

San Francisco would cost 21 per carton plus costs of drayage to

a warehouse

States by letter dated April 23 1959 accepted a proposal by

Smyth Storage Inc Smyth that Smyth act as its solicitation

and distribution agent in the San Francisco Bay area States

agreed to guarantee Smyth s expenses for the 90 day trial period

beginning May 1 1959 and to pay 300 00 a month as a retainer

Under the plan storage and accessorial services would be pro

vided at Howard Terminals in Oakland Howard would bill Smyth

6 F M B

732 047 0 64 21
308 FEDERAL MARITIME BOARD

for services After Smyth paid Howard Smyth billed and was 

imbused by States Fourteen shippers were provided serv

which began in April 1959 and terminated in February 1960

Howard a public wharfinger in Oakland Calif performed 

work for shippers pursuant to its Marine Terminals Associa

of California Tariff No 1A containing terminal rates and char

There are no written agreements with Howard in evidence 

Howard officials and States officials had discussions about 

arrangement Howard had discussions with States about the p

aration of invoices and followed the discussions by sending 

invoices for services addressed to shippers c o Smyth Stor

Inc 1798 Timothy Drive San Leandro Calif and Smyth 

Howard States later paid Smyth This sequence of furnish

services rendering invoices and receiving payments was follo

in other transactions The respondents States and Howard 

knowledge the arrangement and do not contest that free sto

was provided as far as 14 shippers ar0 concerned before the p

tice was discontinued February 29 1960

III DISCUSSION

The order of investigation recites practices which may co

tute the granting of undue or unreasonable perference or ad

tage to certain persons and localities in violation of Sec 16 o

Act or which may be unjustly discriminatory between shipper

ports or may constitute unjust or unreasonable practices in v

tion of Sec 17 ofthe Act

The second paragraph of Sec 16 makes it unlawful for 

common carrier by water or other person subject to the Act ei

alone or in conjunction with any other person directly or 

directly to give undue or unreasonable preference or advantag

any particular person or locality or to subject any particular 

son or locality to any undue or unreasonable prejudice or di

vantage or to allow any person to obtain transportation for p

erty at less than the regular rates or charges established 

enforced on the line of a carrier by any other unjust or un

device or means Violators of any provision of this section 

guilty of a misdemeanor

Sec 17 provides that every common carrier by water and e

other person subject to the Act shall establish observe and 

force jliSt and reasonable regulations and practices relating t

connected with the receiving handling storing or delivering 

6 F M 
INVESTIGATION OF STORAGE PRACTICES 309

property Whenever the Board finds that any such regulation or

practice is unjust or unreasonable it may determine prescribe

and order enforced ajust and reasonable regulation or practice

Based on his review of this record and testimony the Examiner

recomended that the practices of PFEL TOA States and Howard

be found unduly and unreasonably prejudicial and perferential

and that the aforesaid respondents be found to have allowed per

sons to obtain transportation for property at less than the regular

rates or charges and that such practices be found unjust and

unreasonable in violation of Secs 16 and 17 of the Act

PFEL excepts to the recommended finding that PFEL acted in

concert with TOA in soliciting promoting fostering as well as

participating in TOA s storage and distribution services insofar as

such services were limited to imported cargo distributed only by

PFEL ships at Stockton and that such practices violated Sees 16

and 17 of the Act PFEL also excepted to the recommended find

ing that TOA was an other person as defined in Sec 1 ofthe Act

and as the term is used in Sec 16 and to the statements in support

thereof PFEL excepted to the Examiner s statement that it was

aware of the limitation TOA s distribution services to imports dis

charged only from PFEL ships

TOA excepts to the following conclusions in the recommended

decision

1 TOA is furnishing warehouse or other terminal facilities in

connection with a common carrier by water and is an other per

son subject to the Act

2 TOA s practices at Stockton were and are unreasonably prej

udicial and preferential in violation of Sec 16 and were and are

unjust and unreasonable practices related to or connected with the

receiving handling storing or delivering of property in violation

of Sec 17

3 TOA s failure to publish a tariff and its practices in connec

tion with its storage and distribution services afforded opportunity

for and TOA provided unequal treatment for shippers and pre

ferred treatment for certain classes of cargo

4 Whether TOA had a tariff and ignored it or had no tariff

does not change the lack of uniformity in the application of its

charges for storage and distribution services

5 By limiting its services to cargoes discharged by PFEL TOA

was and is giving an undue and unreasonable perference and ad

vantage to PFEL and was and is subjecting other carriers such

6 F M B
310 FEDERAL MARITIME BOARD

as States and American President Lines Ltd APL to an un

and unreasonable prejudice and disadvantage

6 In providing its storage and distribution services on impo

TOA limited them to cargo discharged from PFEL vessels PF

was aware of this limitation Insofar as this limitation of 

services to one carrier was unlawful by either providing fo

condoning in the limitation TOA and PFEL acted in conce

violating the Act

7 PFEL acted in concert with TOA in soliciting promot

fo tering as well as participating in TOA s storage and distr

tion services insofar as such services were limited to impo

cargo discharged only by PFEL vessels at Stockton PFEL s p

tices were and are unduly and unreasonably prejudicial and p

erential and allowed persons to obtain transportation for p

erty at less than the regular rates or charges in violation 

section 16 and PFEL s practices were and are unjust 

unreasonable practices related to or connected with the receiv

handling storing or delivering of property in violation of 

tion 17

8 An appropriate order should be entered by the Board 

quiring respondents to ce se and desist from the violations he

found to exist

States makes the same exception as to illegality as TOA in 

exception No 6

Public Counsel excepts to the Examiner s conclusion that 

unnecessary to find that TOA was the agent ofPFEL in provid

storage and distribution services at Stockton

We find these exceptions not sustained and our conclusions 

in accord with those of the Examiner

The unlawful acts covered by the second paragraph of Sec 

apply to a common carrier by water acting either alone or in 

junction with any other person and applies to indirect as we

direct actions

PFEL obligated itself by means oftwo contracts to pay mon

to TOA substantial sumsof money in return for the latter s ag

ment to act as its agent and to perform certain services 

record shows however that PFEL had the facilities to perf

and did in fact perform the identical services TOA was oblig

to perform

The initiating meetings between PFEL officials and TOA org

izers the receipt of TOA correspondence PFEL s corresponde

with TOA and the representations to shippers by PFEL 

6 F l
INVESTIGATION OF STORAGE PRACTICES 311

ployees concerning TOA services all show that PFEL had full

knowledge ofhow TOA performed the agency agreement and what

TOA did with the payments It received PFEL s subsequent lack

of concern about the TOA organization and facilities and failure

to insist on any bona fide services pursuant to the two contracts

shows that PFEL was not concerned with the use of PFEL pay

ments for other unstated yet well understood purposes namely

payment of Stockton s charges for services to shippers as ordered

by TOA Statements by PFEL officials to shippers establish that

PFEL understooQ what TOA was doing for shippers and that it

was solicitation only to the extent that it presented the obvious

economic advantages of what TOA was doing with PFEL pay

ments It was not the customary type of solicitation for shippers

cargoes The lack of advertising tends to show that the economic

appeal of the plan obviated the need The failure to point out

features of PFEL ships and services showed that the normal at

tractions of a line for a shipper were secondary to the economic

advantage TOA offered

The facts are that PFEL 1 made two agreements with two

persons associated as far as this record shows for the sole pur

pose of receiving substantial amounts of money over a period of

about 33 months 2 failed to obtain any performance of the

contracts remotely commensurate with the amounts paid 3

knowing what was going on permitted the use of its payments to

such persons for buying storage and other services for its shippers

or consignees which they would normally have had to buy from

Stockton and 4 acted with the knowledge that TOA limited its

storage services to PFEL cargoes discharged at Stockton Such

facts establish that PFEL as a common carrier by water in con

junction with another person and indirecJly Le through the in

tervention of TOA a gave undue preference and advantage to

inbound traffic through the Port of Stockton and thereby subjected

other ports such as San Francisco to undue prejudice and dis

advantage and b allowed shippers or consignees of inbound

property on its ships to obtain transportation for property at less

than the regular rates or charges then established by PFEL by an

unjust or unfair means contrary to the requirements of Sec 16

of the Act

PFEL shippers charges would normally be the applicable Con

ference tariff rates plus the cost ofservices required at Stockton in

accordance with the Stockton Warehouse Tariff manual The lat

ter costs were avoided by diverting part of the ocean freight

6 F M B
312 FEDERAL MARITIME BOARD

charges back to the shippers or consignees by means of the ben

received from the intermediary TOA

The preference and advantage to Stockton and the prejud

and disadvantage to other ports is undue because substan

econ0mic advantages of the plan were available only through 

TOA organization and only at one port to the exclusion of all o

ports and shippers

The substantial economic advantage which shippers got fr

PFEL via TOA payments is the unfair means which caused 

cost of transportation to shippers to be less than established ra

The fact that TOA operated independently in furnishing s

ices to shippers and PFEL had nothing to do with TOA s op

tions or TOA s limitations on its service or with other busin

decisions are not material because PFEL regardless of TO

independence had a duty to terminate its payments when it k

how they were being used The Examiner correctly evaluated 

evidence to prove that PFEL knew what was going on The 

ther fact that PFEL collected full freight from the shippe

consignee and paid the Port of Stockton compensation prop

due the port for acting as terminal agent are equally immate

since indirect actions and actions in conjunction with others 

also prohibited by Sec 16 The complete interchange of in

mation between the two respondents and the financial depende

of TOA on PFEL evidences that they vereworking in conj unc

with each other The Examiner s conclusions on this point are 

rect and the exceptions thereto are not well taken Baltimo 

Ohio R R Co v United States et al 305 U S 507 1939 

priety of Operating Practices Ne1v YOTk Wa1 ehousing 198 L

134 1933 Practices of San F1 ancisco Bay TeTrninals 2 U S 

588 1941 Storage ChaTges Unde1 Agreements 6205 621

U S M C 48 1939 Storage of Import PropeTty 1 U S l1C 

1937

The facts show that both PFEL and States participated in 

arrangements for receiving handling storing and delive

shippers or consignees property in such a way that the la

would not have to pay normal charges for handling storing 

delivering the property in addition to established freight cha

for transportation Such practices are unjust and unreason

because of the discriminations and preferences they creat

discussed more fully herein

TOA argues 1 that when it takes custody of merchandis

the end of the 7 day free time period the terminal aspec

6 F 
INVESTIGATION OF STORAGE PRACTICES 313

water transportation of property are complete 2 that the

wharfage dock and warehouse facilities referred to in the first

section of the Act must be terminal in character and 3 if

the furnishing of terminal facilities is ended at or before the

time TOA places goods in its assigned warehouse space then TOA

is not furnishing terminal type services and is not an other

person under the Act Therefore TOA is not subject to the

Boar f s jurisdiction because it does Rot meet the description in

the first section of the Act

The first section 0f the Act states that the term other person

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

common carrier by water carryi flg on the business of furnish

ing wharfage dock warehouse or other terminal facilities in

connection with a common carrier by water The term person

includes corporations and partnerships

In Wharfage Charges and Practices at Boston Mass 2 U S M C

245 1940 the U S Maritime Commission held that the Com

monwealth of Massachusetts was an other person within the

definition contained in the Act insofar as it engages in the

activities of an other person as defined in the Act The activities

were not otherwise described but the record showed they related

to the unloading of ships and warehousing of cargoes In P1 ac

tices Etc of San Francisco Bay Area Terminals 2 U S M C 588

1941 the respondents Board of Port Commissioners of the City

of Oakland and the Stockton Port District were admonished that

any space rental device used for the purpose of unduly discrim

inating between storers of cargo in water transportation is strictly

in violation of section 16 of the Shipping Act 1916 as amended

Id at 608 Respondent here seeks to limit the warehouse storage

related to furnishing terminal facilities to the free time period

This test is too limited and is a too conceptualistic description of

the consequences of what TOA was doing

TOA has furnished its customers the identical facilities and

related services Stockton furnished its customers subject to the

latter s Warehouse Tariff No 1 All TOA has done is place

itself between Stockton and its consignee customers for the pur

pose of ordering or obtaining such services for them IfStock

ton furnishes warehouse or other terminal facilities in connection

with a common carrier by water so does TOA It is implicit in

Practices Etc of San Francisco Bay Area Terminals that Stock

ton furnishes terminal facilities in connection with common

carriers by water We hold that a person is furnishing ware

6 F M B
314 FEDERAL MARITIME BOARD

house or other terminal facilities in connection with a comm

carrier by water who 1 receives custody of property from 

common carrier by water or its agent after unloading at a d

or pier and 2 keeps custody thereof within the geograph

confines of an ocean terminal facility such as a warehouse ad

cent to adock or pier until custody of the property is relinquish

to an inland carrier or to the consignee TOA meets this desc

tion The terminal character of the facilities furnished contin

until the inland carrier takes possession The Board has assum

jurisdiction up to this point Investigation of Certain Stor

Practices of the Port of Longview Commission at the Por

Longview Washington 6 F M B 178 1960 We note that pu

terminals were thought to be subject to regulation by the te

of the Act according to the understanding of Congressman A

ander one ofthe framers of the Act See Debates on H R 15

in the House of Representatives 53 Congo Rec 8276 

terminal aspect of handling property is not complete at the t

goods are delivered by Stockton to the lessee of its assig

warehouse space Other facts may also constitute one an o

person but the foregoing principle is applicable to the fact

this case

Based on the facts that TOA 1 rented warehouse space 

offered the warehouse and terminal services and facilities 

scribed in its letters to potential clients and 3 contracted 

Stockton s warehouse and terminal services for TOA clients T

was properly found to be carrying on the business of furnish

warehouse or other terminal facilities TOA 1 by recei

consignees cargoes from PFEL 2 by its agreements w

PFEL and 3 by its arrangement with shippers using PF

transportation was also properly found to be acting in connec

with a common carrier by water TOA is therefore an o

person subject to this act within the definition of such term 

the fourth paragraph of the first section of the Act and as 

term is used in the second paragraph of Sec 16 of the Act 

first exception is rejected

TOA practices at Stockton were related to and connected 

the receiving handling storing and delivering of property s

TOA received property unloaded from PFEL ships handled 

property by having it moved to TOA s assigned space in the te

nal area stored the property and performed further hand

operations on the property and delivered it to an inland car

6 F 
INVESTIGATION OF STORAGE PRACTICES 315

These practices involve services related to the provision of ware

house and terminal facilities

TOA s method of soliciting freight was to offer shippers ware

house facilities at Stockton in which it would hold merchandise

without charge and would perform certain other services without

chaJge except a charge for putting tags on packages Later TOA

made small charges per package but did not specify what par

ticular service the charges were for The charges were never

related to the value of the service performed and were far below

its normal cost TOA solicitation representations were directed

entirely to the presentation of these services to the low charges

and to the fact that shippers would thereby avoid substantial ex

penses which they would normally have to pay when their

shipments pass through a warehouse and are processed in vari

ous ways between the unloading from a common carrier by water

and onto an inland carrier The only charges were for expressly

requested special services and such charges were at cost The

essence of the TOA appeal was Hfree storage TOA never men

tioned any details about PFEL services which solicitors usually

present to shippers and which shippers are usually interested in

Nor did it maintain any soliciting personnel at any of the places

where potential shipper clients were located

TOA s performance for PFEL on one hand and charges to

shippers on the other disclose a complete discrepancy between the

value of the services rendered by TOA to each and the amounts

charged for its services Shippers through the intervention of

TOA were the beneficiaries of PFEL s payments and PFEL in

return was the recipient of the shippers business TOA was the

instrument for channelling PFEL money so that this result could

be achieved

These actions establish that TOA as an Uother person subject

to the Act gave economic pr ference to shipments to the locality of

Stockton and to shippers using PFEL at Stockton As a result

other localities than Stockton and other shippers were subjected

to prejudice and disadvantage and shippers through Stockton

were allowed to obtain transportation at less than PFEL s

established rates

TOA argues that the arrangement was a trial to obtain cost

experience before making compensatory charges later on The

Act however would be violated at the time of the first offending

action and without reference to motivation

6 F M B
316 FEDERAL MARITIME BOARD 

TOA by using money paid to it by PFEL and obtained 

PFEL from its freight revenues from shippers both with 

full knowledge of each party also indirectly allowed its shipp

clients to obtain transportation for property on PFEL ships 

less than the regular rates or charges then established and 

forced on the line of PFEL by an unjust and unfair mea

The unjust and unfair means consist of making representati

that it would perform certain services and concealing the fact 

Stockton performed the services pursuant to the latter s ta

and of absorbing on behalf of shippers the normally applica

warehouse service costs with payments by the carrier

TOA s assumption of custody over shippers and consign

property without as far as this record sho vs executing 

receipt therefor or being named as agent in any shipping do

ments covering particular property and its assertion of po

to direct Stockton as to the movement of and services to 

property without furnishing proofs of its interest in the prop

constitutes a failure to establish a just practice relating to 

receiving handling storing and delivering of property within 

meaning of Sec 17

The practices shown establish violations of Sees 16 and 17 

the examiner found and the second exception is rejected

Preferred treatment by differing charges for certain clas

of cargo results in discrimination against other cargo Practic

etc of San FnLncisco Bay Area Terminals 2 U S M C 588 

1944 TOA insulated its clients from Stockton s Wareho

Tariff No 1 and did not publish its own tariff for furnishing id

tical services but made varying charges based on negotiat

Negotiation is the antithesis of tariff uniformity The err

method of charging shippers or consignees shows that the char

were an unimportant part of the arrangement and that the 

capture of costs from shippers or consignees was not a signific

factor in TOA s operations The Examiner was correct in find

that the absence of a tariff was a device or means which was 

fair or unjust The third and fourth exceptions are rejected

By limiting its services to PFEL cargoes and excluding carg

of other carriers from the economic advantages of its wareho

and terminal facilities TOA was properly found to be prej uclic

the excluded carriers and placing them at an unreasonable 

advantage in the cornpetition for cargoes The fifth exception 

rejecteGl

6 F M 
INVESTIGATION OF STORAGE PRACTICES 317 

The facts clearly establish that PFEL and TOA acted in con

junction with each other in providing money and services which

enabled each to perform actions in violation of the Act hence the

sixth and seventh exceptions relating to actions in concert in

violating the Act are not well taken

The remaining exception is to the failure to find that TOA was

an agent of PFEL becalise the latter knew that TOA practices

were at best of dubious legality and that the two collaborated

in establishing the scheme as a joint venture Neither establishes

agency nor is such relation essential We agree with the Exam

iner in effect each is an independent contractor and as such has

acted in conjunction with each other and with Stockton To

prove acts in conjunction it is not necessary to show agency

The Act applies to such specific actions by the individual

respondents Whether a party is a dummy as contended or

whose idea the plan was or whether PFEL successfully disasso

ciated itself from TOA activities is not controlling The sub

stantial effect of the actions of each respondent on transportation

have been considered and found to be contrary to the terms ofthe

Act as indicated herein without regard to their status as agents

or principals

States simply made a forthright agreement with an inter

mediary Smyth analogous to TOA whereby Smyth like TOA

would pay storage and other warehouse charges normally charge

able to shippers and would be reimbursed by the carrier States

Pursuant to the arrangement 14 shippers did not have to pay

storage charges The only substantial difference is that PFEL

paid TOA without regard to the cost of the services and appar

ently paid ahead of time instead of afterwards based on actual

costs The result of the two procedures is identical and States

has not seriously contested its consequences relying rather on

a showing that if its plan is not authorized neither is that ofTOA

States made arrangements with Smyth and Howard whereby

14 shippers were relieved of paying storage charges States

used Smyth as agent to pay the charges and Smyth was later

reimbursed Inasmuch as such concessions on storage charges

were not available to all shippers and because different periods of

storage were required by different shippers discriminatory treat

ment was involved and such actions are likewise unreasonable

practices connected with the receiving storing and handling of

cargo Although States problem of meeting PFEL competition

may be considered as a mitigath1g factor it does not exculfate

6 F M B
318 FEDERAL MARITIME BOARD

the respondent from being found in violation of statu

obligations

Howard is a public terminal and wharfinger subject to the 

Although Howard received the proper charges for all stor

services rendered to the 14 customers of States it neverthe

engaged in an arrangement whereby the common carrier by wa

States would absolve the shipper of storage charges The rec

supports a finding that Howard was aware that States and not 

shipper would pay for Howard s services Howard s submis

of invoices to Smyth which it knew would be paid by States an

participation in the arrangement constitutes an unjust and 

reasonable practice connected with the receiving handling 

storing of property in violation of Sec 17 of the Act

We conclude 1 that each of the persons comprising the part

ship and the sole stockholders ofthe business association identi

as TOA and Howard as other persons subject to the Act 

PFEL and States as common carriers by water have violated 

the provisions of Sec 16 of the Act and each is guilty of a 

demeanor 2 that each of the persons comprising the partners

and the sole stockholders in the business association identifie

TOA and Howard as other persons subject to the Act and PF

and States as common carriers by water have violated the sec

paragraph of Sec 17 of the Act by not observing establishing 

enforcing just and reasonable practices relating to the receiv

handling storing or delivering of property and 3 that this 

ceeding should be discontinued

The facts and findings kerein relative to such violations s

be referred to the Department of Justice for appropriate ac

An appropriate order will be entered

6 F M 
INVESTIGATION OF STORAGE PRACTICES 319

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 1st day of June 1961

No 871

INVESTIGATION OF CERTAIN STORAGE PRACTICES OF PACIFIC FAR

EAST LINE INC TRANS OCEANIC AGENCIES STATES STEAMSHIP

COMPANY AND HOWARD TERMINALS AT THE PORTS OF STOCKTON

AND OAKLAND CALIFORNIA

This proceeding of inquiry and investigation having been en

tered upon by the Board on its own motion and having been duly

heard and submitted after investigation ofthe things and matters

involved having been had and the Board on the date hereof hav

ing made and entered of record a report containing its conclusions

and decision thereon which report is hereby referred to and made

a part hereof

It is Ordered That the respondents Pacific Far East Line Inc

States Steamship Company Trans Oceanic Agencies and Howard

Terminals be and each one is hereby notified and required to here

after abstain from the practices herein found to be unlawful under

Sec 16 and Sec 17 of the Shipping Act 1916 as amended and

notify the Board within ten 10 days from the date of service

hereof whether such respondent has complied with this order and

if so the manner in which compliance has been made pursuant to

Rule 1 c of the Rules of Practice and Procedure 46 CFR 2013

It is Further Ordered That the proceeding be and is hereby

discontinued

By the Board

Sgd THOMAS LISI

SeC1 etaTY

6 F M B
FEDERAL MARITIME BOARD

No 889

UNAPPROVED SECTION 15 AGREEMENT

NORTH ATLANTIC BALTIC TRADE

Decided June 19 1961

Respondents found not to have entered into or carried out before app

under Section 15 of the Shipping Act 1916 as amended during 

or prior thereto an agreement affecting westbound trade from Go

burg Sweden to the United States North Atlantic Coast

Agr ement No 7549 as amended found to have been lawfully carried 

in a fashion consistent with its terms as heretofore approved by 

Board and Agreement No 7549 as amended should not be disappro

A F Chrystal Ira L Ewers and W B Ewers for respon

MooreMcCormack Lines Inc

T K Roche for respondents Swedish American Line and Tr 

atlantic Steamship Co Ltd

William J Smith Jr as Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER Vice

Chairman RALPH E WILSON Member

By THE BOARD

The Board by an order dated January 15 1960 and sup

mented April 4 1960 ordered that an investigation be institute

determine 1 whether any of the persons named as respond

have carried out before approval under Sec 15 any agreem

requiring such approval in violation of Sec 15 2 whether Ag

ment No 7549 as amended has been lawfully carried out 

3 whether Agreement No 7549 should be disapproved Hear

were held and briefs filed followed by a recommended decisio

the Examiner Exceptions and replies were filed and we h

heard oral argument

320

6 F M
UNAPPROVED SEC 15 AGREEMENT N ATL jBALTIC TRADE 321

The Examiner concluded that the respondents should be found

not to have entered into or carried out before approval under Sec

15 of the Shipping Act 1916 as amended Act during 1958 or

prior thereto an agreement affecting the westbound trade from

Sweden to the United States and that Agreement No 7549 as

amended has been lawfully carried out consistently with its terms

and should not be disapproved

The Examiner found thatAgreement No 7549 dated October 17

1945 had been approved by the Board on December 4 1945 and

has never been considered by the parties to be inoperable Amend

ment No 1 of the agreement was likewise filed and approved

March 5 1946 and is also still in effect

The agreement provides that beginning October 27 1945 and

continuing until cancelled by 30 days notice the Lines agree to

alternate sailings under Swedish and American flag every Friday

from New York Ships are to sail as scheduled loaded or not

loaded The purpose of the alternating sailings is to main

tain a regular service to Sweden with an approximately even

division of Swedish and U S freight East and West bound orig

inatin from or destined to U S North Atlantic Ports between

Swedish and American flag ships both from a freight revenue

point of view and of volume The amendment provides that the

previously agreed alternate sailings under Swedish and American

flags every Friday from New York be increased from time to

time as mutually agreed by the two parties in such a manner as

to carry out the purpose of the Agreement as to an even

distribution offreight

In 1946 trade prospects changed and the parties amended the

original agreement to provide that alternate sailings be increased

from time to time as mutually agreed in such a manner as to best

serve the trade As trade has developed Swedish American sails

out of New York weekly and Moore McCormack now goes out

about 3 times a month weather permitting

None of the respondents has ever considered the agreements to

be inoperative and the changes in departures have improved

services

By a letter dated July 28 1958 the President of Moore McCor

mack wrote to the Director of Swedish American concerning the

former s desire to serve Gothenburg westbound Moore McCor

mack indicated an intention to have a

sailing amonth westbound

from Gothenburg with the time of the month to be decided upon

6 F M B
322 FEDERAL MARITIME BOARD

after consultation A copy of this letter was not filed with 

Board

The foregoing facts were found by the Examiner and the Bo

takes no exception thereto

Objection is made to the finding of the Examiner I

that 

subject agreement has never been considered by the parties to 

inoperative and 2 that the discontinuance of alternating sailin

by Moore McCormack and Swedish American was consistent w

the amended agreement Under these circumstances Pu

Counsel excepts to the failure of the examiner to find that 

spondentshave violated Sec 15 ofthe Act by modifying or can

ling Agreement No 7549 without Board approval

We find however that the changes in respondents pattern 

sailings are consistent with their undertakings and represent 

justments to the circumstances The changes are operating m

ters comparable to current rate changes which need not be filed 

agreements under Sec 15

The correspondence between the officers of the two respond

lines is merely an implementation of the basic agreement wh

has been approved and which is still operative

In conclusion we find that no agreement of the type described 

Sec 15 of the Act affecting westbound trade from Gothenb

Sweden to the United States North Atlantic coast was entered i

or carried on without approval of the Board during 1958 or p

thereto by the respondents and that Agreement No 7549 has b

performed according to its terms as heretofore approved by 

Board and that said Agreement No 7549 as amended should no

disapproved

An order discontinuing this proceeding will be entered

6 F lrf
UNAPPROVED SEC 15 AGREEMENT N ATL jBALTIC TRADE 323

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 19th day of June 1961

No 889

UNAPPROVED SECTION 15 AGREEMENT

NORTH ATLANTIC BALTIC TRADE

This proceeding having been instituted by the Board upon its

own motion and having been duly heard and submitted and in

vestigation of the things and matters involved having been had

and the Board on the date hereof having made and entered of

record a

report containing its conclusions and decision thereon

which report is hereby referred to and made a part hereof

Itis Ordered That this proceeding be and it is hereby discon

tinued

BY THE BOARD

Sgd THOMAS LISI

Secretary 

6 F M B

732 047 0 64 22
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 125

MOORE McCORMACK LINES INC

ApPLICATION UNDER SECTION 805 a

Decided June 23 1961

Moore McCormack Lines Inc granted written permission under Section 

a of the Merchant Marine Act 1936 as amended for its vessel the 

ROBIN MOWBRAY presently under time charter to States Ma

Lines Inc to engage in one eastbound intercoastal voyage carryin

cargo of lumber and orlumber products from United States Pacific N

West ports to Wilmington Del Camden N J and Baltimore Md 

mencing on or about June 26 1961 since granting of the permis

found 1 not to result in unfair competition to any person firm or 

poration operating exclusively inthe coastwise or intercoastal trade 

2 notto be prejudicial to the objects and policy of the Merchant Ma

Act 1936 as amended

John R Ewers for applicant

Donald Brunner as Public Counsel

REPORT OF THE DEPUTY MARITIME ADMINISTRATOR

BY THE DEPUTY MARITIME ADMINISTRATOR

Moore McCormack Lines Inc filed an application for writ

permission under Section 805 a of the Merchant Marine A

i936 as amended 46 U S C 1223 the Act 1

for its vessel 

SS ROBIN MOWBRAY presently under time charter to St

Marine Lines Inc to engage in one eastbound intercoastal voy

carrying a cargo of lumber and or lumber products commen

at United States Pacific North West ports on or about June 

1961 for discharge at Wilmington Del Camden N J and B

more Md

1

Section 805 a is set forth in Appendix A attached hereto

324 6 M
MOORE McCORMACK LINES INC SEC 805 a APPLICATION 325

The application was duly noticed in the Federal Register ofJune

17 1961 26 F R 5438 Hearing was held on June 23 1961 No

parties intervened in opposition to the granting of the requested

permission

The testimony in this case shows that States Marine has cargo

bookings of approximately 61 2

million feet of lumber and lumber

products States Marine advises that it has been unable to obtain

any other suitable ship for this position This sailing which is

scheduled to commence shortly after loading on June 26 1961 will

not increase the normal pattern of scheduling in States Marine

Lines Inc eastbound intercoastal service

On this record it is found that the granting of the requested

permission will not result in unfair competition to any person firm

or corporation operating exclusively in the coastwise or inter

coastal trade or be prejudicial tothe objects and policy of the Act

This report shall serve as written permission for the voyage

6 MA
326 FEDERAL MARITIME BOARD

APPENDIX A

Section 805 a

It shall be unlawful to award or pay any subsidy to any contractor un

authority of title VI of this Act or to charter any vessel to any person un

title VII of this Act if said contractor or charterer or any holding comp

subsidiary affiliate or associate of such contractor orcharterer orany off

director agent or executive thereof directly or indirectly shall own ope

or charter any vessel orvessels engaged in the domestic intercoastal or co

wise service or own any pecuniary interest directly or indirectly in 

person or concern that owns charters oroperates any vessel or vessels in 

domestic intercoastal or coastwise service without the written permissio

the Commission Every person firm or corporation having any interes

such application shall be permitted to intervene and the Commission shall 

a hearing to the applicant and the intervenors The Commission shall 

grant any such application if the Commission finds it will result in un

competition to any person firm or corporation operating exclusively in 

coastwise or intercoastal service or that it would be prejudical to the obj

and policy of this Act Provided that if such contractor orother person ab

described or a predecessor in interest was in bona fide operation as a com

carrier by water in the domestic intercoastal orcoastwise trade in 1935 

the route or routesor in the trade ortrades for which application is made 

has so operated since that time or if engaged in furnishing seasonal ser

only was in bona fide operation in 1935 during the season ordinarily cov

by its operation except in either event as to interruptions of service 

which the applicant or its predecessor in interest had no control the Com

sion shall grant such permission without requiring further proof that pu

interest and convenience will be served by such operation and without fur

proceedings as to the competition in such route or trade

If such application be allowed it shall be unlawful for any of the per

mentioned in this section to di ert directly or indirectly any moneys p

erty or other thing of value used in foreign trade operations for whic

subsidy is paid by the United States into any such coastwise or intercoa

operations and whosoever shall violate this provision shall be guilty 

misdemeanor

6 M
FEDERAL MARITIME BOARD

No 765

INVESTIGATION OF PRACTICES OPERATIONS ACTIONS AND

AGREEMENTS OF OCEAN FREIGHT FORWARDERS AND

RELATED MATTERS AND PROPOSED REVISION

OF GENERAL ORDER 72 46 CFR 244

No 831

INVESTIGATION OF PRACTICES AND AGREEMENTS OF COMMON

CARRIERS BY WATE IN CONNECTION WITH PAYMENT

OF BROKERAGE OR OTHER FEES TO OCEAN FREIGHT

FORWARDERS AND FREIGHT BROKERS

Decided June 19 1961

1 Performance by forwarders of forwarding services free of ch rge or at

non compensatory charges to shippers and receipt of brokerage from

carriers on the shipments found to violate section 16 of the Shipping

Act 1916 as amended

2 Forwarders in assessing charges to shippers in varying amounts adding

disguised markups to charges for accessorial services procured for their

shippers and performing forwarding services free or at non compensa

tory charges for some shippers and not for others found to give undue

or unreasonable preference to some shippers and subject others to undue

or unreasonable prejudice or disadvantage in violation of section 16

First of the Act and to engage in unjust and unreasonable practices in

violation of section 17 of the Act

3 Forwarders found to have failed to establish observe and enforce just

and reasonable regulations and practices relating to or connected with

the receiving handling storing or delivering of property and the prac

tices of forwarders in connection therewith found unjust and unreason

able in violation of section 17 of the Act

4 Performance by carriers of forwarding services free or at non compensa

tory charges to shippers found to violate section 16 Second of the Act

6 F M B

327
328 FEDERAL MARITIME BOARD

5 Payments by carriers to forwarders of brokerage resulting in ind

rebates to shippers through the performance by forwarders of forw

ing services free or at non compensatory charges in violation of se

16 of the Act found to be an unjust and unreasonable practice 

violation of section 17 of the Act

6 Violations of the Act as shown aqove found to have occurred regul

and unjust and unreasonable practices relating to and in conne

with the receiving handling storing and delivering of property fo

to exist Just and reasonable rules and regulations in connection th

with detei mined prescribed and ordered enforced

7 Forwarders and carriers found to have entered into and carried 

agreements or arrangements providing for the regulation of compet

pooling or apportioning of earnings or cooperative working arra

ments without prior approval of the Board in violation of sectio

of the Act

8 Findings in prior decisions cited in order in No 831 that agreem

between carriers prohibiting payment of brokerage or limiting bro

age to less than 1 percent of freight charges are or would be d

mental to the commerce of the United States found no longer valid

Benjamin M Altschule for Customs Brokers and Forward

Association of America Inc respondent and intervener 

International Expediters Inc respondent

J Richa1d Townsend for Pacific Coast Customs and Fre

Brokers Association and Los Angeles Customs and Freight B

ersAssociation Inc respondents and interveners

Gerald H Ullmnn for New York Foreign Freight Forward

and Brokers Association Inc respondent and intervener and P

of New York Ocean Freight Forwarders Conference respond

G M Footner for Baltimore Custom House Brokers and F

warders Association respondent and intervener

Robert Eikel and E C Leutsch for Texas Ocean Freight F

warders Association respondent

Ramon S Regan for United States Van Lines Inc respond

Paul J Coughlin for Judson Sheldon International Division 

National Carloading Corporation respondent

Edwnrd M Alfano for Pan American Van Lines I

respondent

Richard G Green for Oxford Agency of N Y Ltd respond

Frnnk G Wittenberg for Universal Transport Corporat

respondent

Geo1 ge F Galland for American Union Transport I

respondent

Hyman I Alalatzky respondent and intervener pro see

6 F M 
FREIGHT FORWARDER INVESTIGA TION BTC 329

Paul A Roge for D B Dearborn Co respondent

Roger Roughton for Thomson Earle Inc respondent

Charles I Runi for Parker Commission Co respondent

J Bertral1 Weg11wn and Myron L Shapi1 o for D C Andre

Co Inc respondent

R E Johnson for Railway Express Agency Inc respondent

Cyrus C Guidry for Board of Commissioners of the Port of

New Orleans intervener

Chas R Seal for Virginia State Ports Authority Intervene

Chwrles B Myers Robert N Bwrchl1w1 e John S BU1 chnw

and Ma1 tzn E Coughl in for National Industrial Traffic Leagu

intervener

T W Titswo1 th for Ebasco Services Incorporated responden

G M Rebmun for United Van Lines Inc respondent

Arlhur Liebe stein for Atlas Van Lines Inc respondent

Leonard G Jal1teS for Capca Freight Conference Pacific Coast

Caribbean Sea Ports Conference Pacific Coast European Freight

Conference Pacific Coast Mexico Freight Conference Pacifl

Coast Panama Canal Freight Conference Pacific Coast Riv I

Plate Brazil Freight Conference Pacific Indonesian Canferene

Pacific Straits Conference and Pacific Vest Coast of Sout

America Conference respondents

Alex C Cocke for Gulf French Atlantic Hamburg Ran

Freight Conference Gulf United Kingdom Conference Gulf

Scandinavian and Baltic Sea Ports Conference Gulf lVledite1

ranean Ports Conference and Gulf South and East African Call

ference respondents

Odell Komine1s Mal k P Schlele1 J Alton Boye1 and Joll n

Cunninghal1 for United States Atlantic Gulf Puerto Rico COll

ference respondent

John R Mahoney for Associated Latin American Steamshh

Conferences respondent

Allen E Cha1 les and Gilbe1 t C Wheat for Pacific Westbound

Conference respondent and intervener

John Tilney Ca1pente1 for States l1arine Corporation Statf

Marine Corporation of Delaware Isthmian Lines Inc Irish Ship

ping Ltd Mitsubishi Shipping Co and South African Marin

Corporation respondents

He1 1nan Goldman Elkan TU1 k and Elkan Turk J1 for Wii

helmsens Dampskibsaktieselskab AjS Den Norske Afrika O

6 F M D
o FEDERAL MARITIME BOARD

Austlalielinie A S Tonsberg AjS Tankfart I AjS Tankfart 

AjS TankfartV AjS TankfaltVI Compagnie Maritime BeIge 

A Compagnie IVIaritime Congolaise S C R L Skibsaktieselska

Varild Skibsaktieselskapet Marina Skibsaktieselskapet Sa

stad Skibsaktieselskapet Solstad Aktieselskabet Glittre Da

skibsinteressentskabet Garonne Aktieselskabet Standard Fea

ley Egers Befragtningsfolretning AjS Skibsaktieselska

Siljestad Dampskibsaktieselskabet International Skibsaktie

skapet Mandeville and Skibsaktieselskapet Goodwill responde

vVill imn L Ha1n1n for Alcoa Steamship Co Inc responden

Alan B Ald well for Matson Navigation Company and 

Oceanic Steamship Company respondents

Cla1 ence J Koontz Malcol1n D MilleT F W Denniston 

J H Mac01nbet JT for Administrator of General Servi

intervel er

Louis J Lefkowitz and J Bruce l11cDonalcl for State of N

York intervener

vVill imn D RodgeTs and John T Rigby for Commonwealt

Puerto Rico intervener

ChaTles H Tenney Sam uel Mandell and Sidney Btandes 

City of New York intervener

Walte J Myskowski A rthuT L Winn Jr Sidney Goldst

F A MulheTn Samuel H Moennan J Stanley Payne and FT

E Mullen for Port of N ew York Authority intervener

Joseph A Sinclai1 and Stephen Tinghitella for Commerce 

Industry Association of New York Inc intervener

T R Stetson Edwin A McDonald Jt F Alan Lesser O

L CTook and Leonard G James for United States Borax Ch

ical Corporation intervener

Thon as F Lynch for United States Steel Export Comp

intervener

Leonard G James for Sunkist Growers Inc intervener

Elnw1 C Maddy for witness George F Foley appearing u

subpoena

C LeonaTd GOTdon for witness George H Bernard appea

under subpoena

Elliott B Nixon for witness C R Andrews appearing u

subpoena

Richanl J Gage Robe1 t B Hood Jr Fl ank W Gorm

Edward Aptaker and Robe t E Mitchell as Public Counsel

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 331

REPORT OF THE BOARD

THOS E STAKEM ChaiTman SIGFRID B UNANDER Vice Chair

man RALPH E WILSON Membe1 

BY THE BOARD

These proceedings were consolidated for hearing present re

lated issues and will be disposed of in one report

In No 765 we instituted a general investigation into the

practices of ocean freight forwarders by order of October 6

1954 with theview of amending or supplementing General Order

72 regulating the business practices of such freight forwarders

46 CFR Part 244 or taking such other action as might be war

ranted by the record Subsequently by notice of proposed rule

making issued March 11 1957 and published in the Federal

Register of March 19 1957 22 F R 1779 we instituted a rule

making proceeding pursuant to section 4 of the Administrative

Procedure Act 5 U S C 1003 proposing a revision of General

Order 72

Petitions were filed by interested ocean freight forwarder

associations requesting that the rule making proceeding be dis

missed for lack of jurisdiction These petitions were denied Pro

posed Rules Governing F1 eight ForwardeTs 5 F M B 328 1957

on the ground among others that certain of the arguments ad

vanced were premature The jurisdictional issues were according

ly again raised at the outset of the hearings herein

In an order of January 3 1958 in No 765 published in the

Federal Register of January 15 1958 23 F R 277 we stated

that the final form and scope of the rules and regulations which

would ultimately be promulgated in the rule making proceeding

should properly await the conclusion of our investigation of

forwarder practices and that the rule making proceeding should

be consolidated with the investigation

In No 831 published in the Federal Register of January 15

1958 23 F R 278 we instituted an investigation of the practices

and agreements of common carriers by water in connection with

the payment of brokerage or other fees to ocean freight forward

ers and freight brokers

Hearings were held at New York N Y San Francisco Calif

and New Orleans La during the period November 5 1958

through February 18 1959 United States Steel Export Company

and the Pacific Westbound Conference intervened in No 765

Commerce and Industry Association of N ew York Inc the Ad

6 F M B
332 FEDERAL MARITIME BOARD

ministrator of General Services National Industrial Tr

League United States Borax and Chemical Corp Sunkist G

ers Inc Port of New York Authority and Board of Com

sioners of the Port of New Orleans intervened in Nos 765 

831 and Hyman 1 Malatsky doing business as Bergen Ship

Service Baltimore Custom House Brokers and Forwarders A

ciation New York Foreign Freight Forwarders and Bro

Association Inc Customs Brokers and Forwarders Associ

of America Inc Pacific Coast Customs and Freight Bro

Association Los Angeles Customs and Freight Brokers Ass

tion Inc and the Commonwealth of Puerto Rico intervene

No 831 Subsequent to the hearing the People of the Stat

New York through its Department of Commerce the City of 

York and the Virginia State Ports Authority were permitte

intervene in both proceedings Requested findings and conclus

pursuant to Rule 13 a of the Board s Rules of Practice 

Procedure 46 CFR 1958 Supp sec 201221 were filed by P

Counsel and opening and reply briefs were filed by the parti

Our order in No 765 including the consolidation therewit

the rule making proceeding contemplated a broad investiga

into the practices of the ocean freight forwarding industry 

whole with the view of promulgating revised regulations 

suant to the Shipping Act 1916 the Actas might be warra

by the record The proceeding in No 831 on the other h

contemplated only a reappraisal of prior holdings to the e

that concerted action by common carriers in the foreign 

merce of the United States which prohibits the paymen

brokerage or limits brokerage payments to less than l1A pe

of the ocean freight charges is detrimental to the commerc

the United States within the meaning of section 15 of the 

and a determination of the extent to which we may contro

limit the payment of brokerage by individual common carr

This order was issued with the view of issuing rules or regulat

which may be required in the public interest or taking such o

action as might be warranted by the record While the app

tion of prior decisions was limited to steamship confere

engaged in foreign commerce see Agreements and Practice

Bl okerage 3 U S M C 170 172 the order in No 831 incl

as respondents carriers and conferences engaged exclusivel

the domestic offshore trades and a petition to discontinue 

investigation as to them was denied

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 333

In aid of the investigation in No 765 questionnaires were

promulgated by orders of February 17 1958 to the ocean freight

forwarder respondents and to named steamship companies and

abstracts of the information thus secured were presented in

evidence

Ocean freight forwarders hereinafter called forwarders are

persons subject to the Act see U S v American Union Transport

327 U S 437 1946 The Act does not require permission from

the Board to enter into the business of ocean freight forwarding

and accordingly the present regulations provide merely for

registration by forwarders with the Board see 46 CFR sec 244 2

et seq As a consequence it is easy for a person to open business

as a forwarder and the industry is overcrowded and extremely

competitive This makes it possible for employeeE of a forwarder

to divert clients from their employer and to set up their own

forwarding businesses One forwarder located in New York has

seen eight forwarding firms started by his ex employees

THE FORWARDING INDUSTRY

Forwarders are generally located in port cities although some

maintain offices in principal interior cities such as Denver Colo

Minneapolis Minn and Washington D C and there are for

warders registered with the Board at every port of commercial

significance in the United States and its possessions In essence

they act as the export departments for their shipper clients In

making export shipments it is necessary that the cargo be booked

aboard a carrier and moved to shipside that shipping documents

be prepared and processed that in the case of foreign shipments

export declarations be prepared and cleared through the United

States Customs Bureau that in some instances consular invoices

required by the country of destination be prepared and processed

and in some cases accessorial services such as crating recoopering

and warehousing be furnished or provided at the port city

In almost every instance shown of record the services of for

warders are engaged by the shipper or consignee of the cargo

and there is no indication that any contractual relationship exists

between the forwarders as such and carriers A few large ship

pers engaged extensively in foreign commerce maintain their

own export departments and perform their own forwarding but

in the great majority of instances the volume of freight exported

by the average exporter does not justify the maintenance by him

of a full time export traffic department at the ports For example

6 F M B
334 FEDERAL MARITIME BOARD

there are more than 17 000 merchants who have executed exclu

service contracts with the Trans Atlantic Associated Freight 

ferences but only about 20 of these maintain export departm

at the port of New York

Except in the instances noted above exporters in the Un

States are dependent upon the forwarders to perform the esse

services required to accomplish the exportation of their go

For the most part the exporters are themselves unfamiliar 

the technical aspects of forwarding and even when they 

located in port cities they rely upon forwarders to handle t

matters It can be said therefore as this record bears out 

the forwarding industry is an integral part of the commerc

the United States and makes a valuable contribution to for

trade through its function of relieving exporters from m

details and formalities connected with export shipments 

Agreements and P1 actices Re BrokeTage sup1 a at 173 4

The record discloses in detail the various services provide

forwarders While not all of them are necessary with regar

each export shipment the principal ones enumerated above m

be performed in every instance either by a forwarder or by 

shipper The forwarders services include the following 

Preliminary to movement of the cargo advising the shipper c

as to the best port to use based on a consideration of in

freight rates frequency of vessel services congestion at the 

ous ports and the availability at a particular port of heavy 

equipment or other special equipment required securing an ex

license if required or reviewing the export license obtained by 

shipper and examination of the letter of credit to insure 

compliance therewith can be effected 2 Tracing the movem

of the cargo to the port and taking action to expedite it if ne

sary 3 Reserving vessel space 4 Preparation of a 

receipt an export declaration a delivery order directing the m

ment of the cargo to the pier and delivery thereof to fne in

carrier and an ocean bill of lading in the number of co

required for the use of the shipper and carrier 5 Clea

the export declaration with the Customs Bureau delivering 

bill of lading and copy of the export declaration to the car

preparing and processing through consular officials the cons

invoice and making a complete set of the documents to conf

with the letter of credit 6 Coordinating the movement of 

cargo to shipside to coincide with the loading schedules of 

carrier 7 Consolidating separate cargo lots for one shipm

6 F M 
FREIGHT FORWARDER INVESTIGATION ETC 335

or consolidating several small shipments for movement on one

bill of lading to avoid minimum charges 8 Arranging for

accessorial services such as the placement of rrtarine insurance

cartage on small shipments cooperage to repair damaged pack

ages or for export packing or crating at the port city and stor

age or warehousing to await the arrival of additional cargo lots

or to accommodate cargo miss ing the vessel 9 Payment of the

ocean freight to the carrier on behalf of the shipper 10 As

sembling the documents in compliance with the letter of credit

and delivering them to the bank

With respect to a substantial portion of the shipments handled

by forwarders they are authorized by their shipper clients to

arrange for the booking of the cargo and to select the carrier

over whose line the shipment will move In performing this

function the forwarder testimony of record is unanimously to

the effect that the forwarder s primary obligation is to the

shipper and that selection of the carrier is generally made with

the view of securing the earliest possible delivery at destination

consistent with good service It is clear however that the for

warders are in a position with respect to shipments for which

they have booking authority to favor one carrier over another

where there is competitive service to the destination port For

this reason the forwarders are regularly solicited for business

by the carriers On rare occasions forwarders are requested by

carriers to secure so called spot cargo when a particular vessel

is in danger of sailing light and they are sometimes able to

secure from their shipper clients such spot cargo but specific

instances cited of record are few Shippers are likewise directly

solicited for spot cargo

Some forwarders also perform fl1nctions not directly related to

the handling of specific shipments which tend to develop foreign

trade In connection with the solicitation of business for their

own account they sometimes induce shippers to enter into the

export business Some of them prepare bulletins compiling the

sailing schedules and rates of different carriers port handling

charges and inland rates for dissemination to their shipper

clients A few maintain representation abroad for the solicitation

of business from foreign consignees or travel abroad for the ame

purpose and are sometimes instrumental in bringing together

foreign consumers and domestic producers The record indicates

however that the growth and development of our foreign export

trade depend primarily upon the sales efforts of the exporters

6 FM B
H36 FEDERAL MARITIME BOARD

themselves Forwarders sometimes intercede on behalf of 

shipper clients for rate adjustments by the carriers both in

and ocean in order to facilitate the movement of goods prod

in the United States at landed costs competitive with g

woduced elsewhere Forwarders are also instrumental in s

19 from their shipper clients the execution of exclllsive se

mtracts with steamship conferences in order that their c

lrlay be entitled to the lower contract rates in those situa

where conferences maintain dual rate systems

Forwarders generally receive their revenues from two sou

Except as noted below they bill their shipper clients fo

various services performed by them as discussed in detail i

in addition on the great majority of the shipments handle

them they receive so called brokerage1 payments from the 

carriers The importance of the brokerage payments to 

evenue position of the forwarders is indicated by Table Ib

which consists of a compilation of the data furnished by the 

warders responding to the questionnaires mentioned above 

brokerage received as shown in the table corresponds closely 

the total amount of brokerage reported as paid by the carrie

1957 of 11 284 748

TABLE I Activity and Revenues of Forwarders in 1957

t

No of No on which Fo

No of shipments brokerage Brokerage 

forwarders forwarded received received co

TLANTIC COAST 897 1 550 621 1 166 702 7 946 425 19 

lJLF COAST 150 238 790 163 411 2 105 75R 2 

ACIFlC COAST 146 155 307 101 071 929 536 1 

ON OCEAN 80 51 502 23 771 127 462 

OTALS u 1 273 1 996 220 1 454 955 11 109 181 24 

J

There is substantial variation in the size and activity o

individual forwarders More than 500 forwarders handled 

than 100 shipments each in 1957 while several processed 

20 000 shipments Of the 1 273 forwarders responding to 

questionnaires 283 or 22 percent handled no shipments at 

1957 221 or 17 percent handled between 1 and 99 shipments 

219 or 17 percent handled between 100 and 499 shipments 

warders in order to function efficiently must keep abrea

I Whether brokerage as used in this report can be construed to 

brokerage fees in the strict sense of the latter term is doubtful in v

the discussion infra

6 
FREIGHT FORWARDER INVESTIGATION ETC 337

changes in traffic patterns and in the regulations of our own and

foreign governments There is evidence of record to the effect

that a forwarder should handle a substantial volume of traffic

500 shipments or more annually in order to maintain current

acquaintance with changing conditions in the trades Some of

the larger forwarders employ persons specializing in the com

mercial practices of the various trade areas

Table II below shows the extent of forwarder activity at the

major ports of the United States in 1957 and the extent of the

dependence of forwarders at the various ports and as a whole

upon brokerage payments Of the total of 919 forwarders report

ing income from brokerage and forwarding fees separately 124

received more than 50 percent of their income from brokerage

TABLE n Forwarder Activity at Major Ports in 1957

Bosto

New Y

Philad

Baltim

Norfo

New 0

Houst

Seattl

San F

Los A

Total

I

Percent of

No of Shipments brokerage to

forwarders handled total income

n Mass 21 2 621 22

ork N Y 732 1 407 454 28

elphia Pa 25 31 798 37

ore Md 13 29 175 43

lk Va 12 10 358 56

rleans La 77 113 680 40

on Tex 16 71 369 42

e Wash 16 16 529 48

rancisco Calif 51 87 183 41

ngeles Calif 61 39 493 23

Uni ted States 1 273 1 996 220 31

As is indicated by the data shown in Table II the port of New

York is by far the leading center of activity in the forwarding

industry New York is the leading general cargo port in the

United States handling about 13 million tons annually in foreign

trades About 80 percent of the general cargo passing through

the port of New York for export ori inates at interior ports

and the physical situation at the port requires complicated and

exacting procedures to coordinate the arrival of the cargo at the

port and its delivery to the pier The tracks of most of the rail

roads terminate on the New Jersey side of the port while most

of the steamship piers are located on the New York side Rail

cargo therefore generally requires lighterage in order to effect

delivery at shipside In order to avoid congestion of lighters at

6 F M B
338 FEDERAL MARITIME BOARD

the piers the steamship companies require the issuance of 

ing permits and the railroads require that delivery orders 

accompanying vessel permits be presented at least 48 hours p

to the time of lighterage delivery specified There are also 

tariff provisions p rmitting split lighterage deliveries of indivi

shipments combined into a single carload which necessitates 

coordination at the port in order to effect delivery at shipside 

Because of their connections with shippers located in th

terior forwarders located at New York not only handle c

passing through that port but they also control a substa

amount of cargo moving through ports elsewhere in the U

States To a substantial degree the New York forwarders thro

such control affect the operations of carriers and forwarder

ports other than New York giving rise to arrangements w

are discussed more fully hereafter The influence of the 

York forwarders extends even to the Pacific Coast For exam

the Pacific Coast European Conference requires that forwar

be specifically designated by their shippers before brokerage 

be paid to the forwarders At the time of the hearing there 

308 such designations on file and only 123 of these forwar

were located on the Pacific Coast with the remaining 185 b

located elsewhere principally at New York

PRACTICES OF FORWARDERS

Forwarding fees and billing The record in these proceed

despite its size discloses no discernible pattern of forwar

fees within the forwarding industry or by anyone forwa

individually Apparently the charges made by a forwarde

his shipper clients are established by negotiation and vary 

shipper to shipper As testified by one forwarder a fee of 

for a particular service may be charged one shipper but ano

who drives a hard bargain may get the same service for 

There is intense competition within the fonvarding industry 

this tends to drive the overt forwarding fees labeled as suc

the forwarder s billing to the lowest possible levels There 

examples in the record of the printed billing forms used by 

eral forwarders One of these shows separate items cove

inland freight cartage ocean freight insurance consular 

preparation and or presentation of consular documents tran

tion blanks etc preparation of bills of lading forwarding 

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 339

customs clearance handling draft and collections cables tele

grams and air mail postage and storage and or demllrrage

charges This form includes a statement that inland freight

ocean freight or consular fees if included are net disbursements

Another billing form shows separate items for inland freight

cartage charges ocean freight and charges insurance charges

consular fees cost of consular blanks preparation of consular

invoices preparation of certificates of origin preparation of bills

of lading forwarding fee customs entry fee customs duty

customs clearance special services postage petties and taxes and

banking documents This form includes the statement Items

appearing on our invoice are cash advances as an accommodation

to you W are obliged to insist upon immediate payment of our

invoice of expenses otherwise it will be impossible for us to extend

you credit facilities on future transactions

A third billing form shows items of ocean freight foreign port

government surcharges landing charges consular fees and blank

consular forms preparation and handling consular invoices cer

tification messenger service inland freight and charges insur

ance arranging insurance under consignee s or shipper s policy

cartage storage arranging transportation preparation and

handling bill of lading and attendance customs clearance check

ing and verification for export control cables telegrams and tele

phone toll charges postage and airmail banking service and

preparation of draft for collection banking service preparation

of documents and handling against letter of credit advancing

ocean freight and charges and arranging confirmation and pay

ment to suppliers This bill includes no forwarding fee as such

and it is the only bill form indicated of record which informs the

shipper client that brokerage payments from the carriers might

be received This form includes the statement

The charges separately listed above for Ocean Freight Inland Freight

Consular Fees and Foreign Port Government Surcharges Landing

Charges are the exact amounts actually paid out by us in each instance for

your account In accordance with our agreement with you and as specified

in the terms and conditions of our Acknowledgment of Shipping Instructions

heretofore sent you our profit in addition to our direct costs expenses and

disbursements incurred for your account is a component of the other items

detailed in this Bill of Charges As agreed as aforesaid we are separately

compensated for our services to the ocean carrier in respect of this shipment

by the steamship company s payment to us of a commission at the rate of

114 of such carrier s charge itemized above for Ocean Freight

6 F M B
340 FEDERAL MARITIME BOARD

The present regulations 46 CFR sec 244 72 require amo

other things that forwarders shall use invoices or other for

of billing which state separately the amount of insuran

premiums actually disbursed for insurance bought in the name 

the shipper or consignee and the amount charged for each 

cessorial service performed A common practice particula

among the N ew York forwarders is for the forwarder to m

up the charges for these accessorial services above the amou

actually disbursed in his billing to the shipper client In numero

instances marine insurance is secured by the shipper under 

own policy leaving the actual placement of the insurance u

specific shipments and the payment of the premiums to the f

warder In these circumstances there is no indication that 

billing to the shipper includes markups in contravention of 

regulation In other cases however insurance is placed by 

forwarder under his own open marine insurance policy and 

forwarder charges the shipper more than the cost of the ins

ance generally without advising the shipper that the latter 

paying more than the cost of the insurance alone These marku

so far as this record shows are imposed in a random fash

vary from shipper to shipper and from shipment to shipment 

appear to bear no relation to the cost to the forwarder for 

services of placing the insurance despite the testimony of so

forwarders that the markups represent legitimate service char

covering the work necessary to secure insurance covera

2

This section provides

244 7 Billing Practices All forwarders shall use invoices or other fo

of billing which state separately and specifically as to each shipment

a the amount of oceanfreight assessed by the carrier

b the amount of consular fees paid to consular authorities

c the amount of insurance premiums actually disbursed for insura

bought in the name of the shipper or Gonsignee

d The amount charged for each accessorial service performed in 

nection with the shipment

e other charges

Provided however that forwarders who offer to the public at large to 

ward small shipments for uniform charges available to all and duly 

with the Federal Maritime Board shall not be required to itemize the c

ponents of such uniform charges on shipments as to which the charges s

have been stated to the shipper at time of shipment and accepted by 

shipper by payment but if such forwarders procure marine insurance 

cover such shipments they must state their total charge for such insura

inclusive of premiums and placing fees separately from the aforementio

uniform charge

6 F M 
FREIGHT FORWARDER INVESTIGATION ETC 341 

preparation of insurance certificates and handling of claims

where necessary Table III below illustrates the practices of the

forwarders in this respect showing the more extreme amounts

of markup from among the instances shown of record

TABLE IH Markup of InsuranceCharges by Forwarders

Forwarder

Hasman Shipping Corporation

Do n

Cosmo Shipping Co Inc u u

Do u

Presto Shipping Agency

Do

D C Andrews Co Inc n

Do

M Weisel Co n

Do u

International Expediters Inc u

Do n

Insurance

premium

26 25

46 17

44 15

22 47

10 69

18 30

30 77

144 40

22187

225 00

32 43

23 90

Percen t

Markup of markup

36 75 140

9 48 21

15 80 36

none 0

20 2

1 20 7

none 0

115 52 80

53 15 24

10 00

I

4

23 53 73

4 71 20

The extent of variation in the practice of marking up insurance

charges as between different shippers by one forwarder is il

lustrated by evidence concerning D C Andrews Co Inc Dur

ing November 1957 this forwarder marked up the insur nce

charges on 9 shipments of one shipper 76 percent or a total of

54 71 and on 4 shipments of another shipper 56 percent or a

total of 50 87 while on 16 shipments handled for two other

shippers there was no markup at all The alertness of shippers

in dealing with forwarders is a factor in determining whether a

markup will be imposed and its amount If a shipper is not

aware of the practice he is more likely to bear the added charge

There is testimony to the effect that the markup is based on what

the traffic will bear and that there is no standard basis for

determining the amount of the markup One forwarder testified

that as a matteI of policy he attempted to mark up the insurance

charges on shipments to a particular area by one percent of the

insured value of the shipments but the evidence as to specific

shipments shows wide variations from this policy Because of

their volume of shipments forwarders under their own open

policies are sometimes able to obtain insurance at lower costs

including the markups to the shippers than could be obtained by

the shippers themselves In instances where shippers maintain

their own marine insurance policies they sometimes request the

forwarders to place insurance under the forwarders policies when

6 F M B
342 FEDERAL MARITIME BOARD

the claim experience on particular types of shipments or to 

ticular areas is unfavorable in order to protect the loss r

under the shippers own policies which bears on the prem

rates

Forwarders are frequently requested to arrange for car

within the port area on shipments As in the case of insura

it is common for the New York forwarders to mark up the c

age charges to the shippers above the amounts disbursed for 

purpose There is evidence that in one instance ocean fre

charges were also marked up in contravention of the regula

but no indication that this practice is widespread since fre

rates are generally readily ascertainable by the shippers

The record leaves little doubt that the practice of marking 

accessorial charges is induced by intense competition within 

forwarding industry which as indicated above tends to d

forwarding fees to unremunerative levels and the markups 

vide a means for the forwarders to recover their costs of arra

ng for the accessorial services and of other forwarding serv

without endangering their competitive position since the ma

up charges are disguised and the amounts thereof unknow

the shippers

The responses of the forwarders to the questionnaires s

that of 1 273 forwarders responding 226 or about 18 per

admitted doing some free forwarding during 1957 Under 

practice the forwarding services are provided without charg

the shipper It is likewise caused by competition between 

warders and is made possible by the receipt of so called broke

payments from the carriers Obviously free forwarding serv

are furnished only to those shippers whose shipments earn s

cient brokerage to pay the cost of forwarding others b

charged fees even though brokerage is collected on their s

ments One Pacific coast forwarder provides free forward

services for 11 of his shipper clients During the last six mo

of 1958 the amount of brokerage received on these 11 acco

was 19 073 and was 29 on one account and ranged from 

to 5 536 on the other 10 accounts Generally only the la

shippers are favored with free forwarding services

The General Services Administration handles export shipm

for a number of Federal agencies Until May 1958 it utilized 

warders registered with the Board and included in a special 

who applied for the privilege of performing free forward

services These free forwarding services were not actively solic

6 F M 
FREIGHT FORWARDER INVESTIGATION ETC 343 

by the General Services Administration During 1957 free for

warding services were offered by 12 forwarders 96 on the

Atlantic and Gulf coasts and 32 on the Pacific coast The ship

ments were rotated among the various forwarders every 30 days

at New York Philadelphia and Baltimore and every 60 days at

other ports In 1957 82 such forwarders handled 3 274 shipments

for the General Services Administration under their offers to

perform free forwarding and the total ocean freight charges on

these shipments were 4 364 870 If so called brokerage was re

ceived on all of these shipments by the forwarders at the usual

rate of 114 percent it amounted to 54 561 or an average of

16 66 per shipment Table I indicates that the average income

per shipment from forwarding fees and brokerage combined in

1957 was 17 75

In March 1958 the Comptroller General ruled in Transportation

Freight Forwarders Free or Reduced Rates for Sermces 37

Compo Gen 601 that the acceptance by a Federal agency of free

forwarding services or forwarding at rates reduced by the for

warder in contemplation of the receipt of brokerage would be in

violation of section 16 of the Act Upon receipt of this ruling the

General Services Administration changed its policies regarding

forwarding and issued invitations to forwarders to bid for the

performance of such services The services sought Included

preparation and processing of export declarations preparation

and processing of ocean bills of lading dock receipts and delivery

orders and processing of consular invoices The specifications

included a condition that any bid submitted which stated that it is

conditioned upon the receipt of a brokerage charge for perform

ing in part or in whole the forwarding services outlined would

be disqualified On berth general cargo the bids received from

east coast forwarders and opened on September 23 1958 ranged

from no charge and 1 cent per shipment to 25 per shipment and

one New York forwarder offered to pay the Government 25 cents

per shipment for the privilege of handling the shipments East

coast bids accepted under this invitation were no charge at

Savannah 1 cent per shipment at New York 10 cents per ship

ment at Baltimore and ranged from 5 to 10 per shipment at

other ports Bids accepted at Gulf and Pacific coast ports ranged

from no charge at Los Angeles and 150 per shipment at New

Orleans upward to 7 50 per shipment

While there is no definitive cost evidence of record there is an

indication that at some time prior to 1955 forwarder costs at New

6 F M B
344 FEDERAL MARITIME BOARD

York averaged 2 76 for preparation and processing of the expo

declaration 4 28 for preparation and processing of consular in

voices and 8 89 for preparation and processing of ocean bills o

lading and related dock receipts and delivery orders or a total o

15 93 per shipment for these services alone There is also su

stantial evidence clearly indicating that as a whole forwardin

fees as such including markups on accessorial charges do n

fully cover the costs of performance by the forwarders of th

services performed by hem and that the receipt of brokerage 

necessary in order for them to recover their costs of operatio

and realize aprofit

Monarch Finer Foods 3a west coast manufacturer of foo

products located at San Francisco exports from numerous por

throughout the country It maintains its own export departme

in San Francisco and there performs all of its own forwardin

services and retains a forwarder in New York to handle shi

ments moving through the latter port This shipper former

paid its New York forwarder 300 per month on a retainer bas

In December 1953 Gentry Shipping Co a New York forwarde

was given the account for a retainer of 150 per month and 

promise of brokerage on shipments moving through San Fra

cisco At the time the silipper was still performing its own fo

warding at San Francisco and no forwarder was collectin

brokerage on the shipments In order to accomplish the arrang

ment a fictitious branch office of the forwarder was set up 

San Francisco headed by the shipper s office manager wh

received a fee from Gentry Brokerage thereafter was collect

from west coast carriers on west coast shipments even thoug

the forwarder performed no services thereon and claims f

brokerage were made upon the carriers and paid by the latte

on shipments which moved prior to the date of certification of t

forwarder to the west coast carriers by the shipper In th

instance forwarding services at New York for the shipper we

partially compensated for by the receipt of unearned brokerage 

west coast shipments

Agreements Frequently a forwarder in one port will contr

the traffic of a shipper who exports from other ports and th

situation is most prevalent among the New York forwarders 

these instances the New York forwarders have entered in

agreements or arrangements with forwarders at other ports su

3

The name was changed to Consolidated Food Products during the cour

of the events here related

6 F M B
1 HEIGHT FORWARDER INVESTIGATION ETC 345

as Baltimore New Orleans and San Francisco under which the

out port forwarders will handle the shipments Compensation to

the outport forwarder is usually made by a split of the brokerage

payments received from the carriers About 80 such agreements

have been filed with and approved by the Board under section 15

of the Act but the record indicates that there are numerous such

agreements in existence which have not been submitted for ap

proval

In order to avoid where possible the necessity of splitting

brokerage payments the New York forwarder have also entered

into arrangements with the ocean carriers under which the work

necessary to complete forwarding services such as clearance of

the export declarations and processing of consular invoices is

accomplished by the ocean carriers without charge at ports such

as Boston and Baltimore and the Southern U S Atlantic

ports of Charleston and Savannah Pursuant to these arrange

ments the New York forwarders have diverted cargo from New

Orleans to Savannah and Charleston in order to avoid the split

ting of brokerage with New Orleans forwarders because carriers

have refused to perform outport forwarding services or the

completion thereof at New Orleans The forwarders at Boston

and Baltimore have requested that the carriers discontinue their

performance of free forwarding services for the New York

forwarders or alternatively that like services be performed at

New York on behalf of the Boston and Baltimore forwarders but

these requests have been refused It has been estimated that the

Baltimore forwarders are deprived of revenues amounting to

about 125 000 annually because of these practices

Relationship between forwarde s and shippers Several in

stances are shown of record wherein relationships exist between

forwarders and shippers or employees and stockholders of ship

pers to the extent that the receipt by the forwarders of brokerage

payments may constitute direct or indirect rebates in violation of

section 16 of the Act as found by the Board in Samuel Kaye

Collection of B okerage Misclass ijication 5 F M B 385 1958

and Luis Louis A Perei aCollection of Brokerage 5 F M B

400 1958 The Ford Motor Company employs a forwarder the

J R Willever Company which prior to 1958 performed no

services whatsoever all of the forwarding work being Ijerformed

by the Ford Motor Company but which was permitted to collect

brokerage payments on all of the shipments exported by Ford

Brokerage payments amounted to almost 200 000 in 1957 Prior

6 F M B
346 FEDERAL MARITIME BOARD

to 1956 90 percent of the stock of vVillever was held by mem

of the Ford family The record does not disclose the pre

relationship between vVillever and the Ford IVlotol Company 

Willever now books all Ford Motor Company shipments with 

carriers and collects brokerage thereon without charge to 

Ford Motor Company and all other fOlwarding services are 

formed by the latter

The situation with regard to Monarch Finer Foods has 

viously been detailed Studebaker Packard Corporation 

practically all of its own forwarding work and permits 

forwarder Commercial Shipping Company to obtain broke

on th shipments From 1944 to 1955 an official of 

Sturlebaker Packard Corporation owned a partnership intere

Commercial Shipping Company The Jahrett Shipping Co 

a forwarder is commonly owned in part with Henry R Jah

Son Inc and Cooper Jahn Inc shippers Brokerage is rece

by this forwarqer on shipments of the commonly owned shipp

Similarly Banho Shipping Corporation a forwarder has com

stockholders with Banho Export Co Inc a shipper

BROKERAGE

General The practice of the payment of brokerage by o

carriers to forwarders is of long standing going back 60 yea

more It is a matter of prime importance in these proceed

since brokerage constitutes a substantial portion of the reve

of forwarders as previously detailed Therefore before ma

findings concerning brokerage practices it is necessary to d

mine as precisely as possible the exact nature of the relation

between forwarders and carriers and whether the broke

payments here involved are actually brokerage fees Past 

sions of the Board and its predecessors and of the courts 

accepted the premise that forwarders in their dealings 

carriers act in the capacity of freight brokers See for exam

In re Gulf Broke age and Fo nvaTding Agreements 1 V S S 

533 1936 Agreements and Practices re BTokeTage 3 V S 

170 1949 and U S lJ American Union TranspoTt supTa 

442 fn 6 It has consistently been held by the Board an

predecessors that brokerage is ompem ation for securing c

for a vessel see Pacific Coast Eu opean Conf PaYTl1 Y

Brokerage 5 F M B 225 233 4 1957and the proceedings t

cited

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 347

In none of these decisions however was there any reference to

the accepted definition of a broker and the elements necessary to

establish a brokerage relationship In American Union Transport

v River Plate Brazil Con s 5 F M B 216 1957upheld in

American Union Transport v United States 257 F 2d 607

1958 cert den 358 U S 828 an attempt was made to dis

tinguish between the forwarding and so called brokerage ac

tivities of a forwarder but this proceeding involved only the

activities of a single forwarder with respect to a specific series of

shipments and the Board relied upon its prior definition of

brokerage as securing cargo for the ship The principles thete

enunciated are relevant however in determining the issues here

A broker is an agent employed to make bargains and contracts

between other persons in matters of trade commerce and naviga

tion for a compensation commonly called brokerage 12 C J S

11 A broker may act as agent for his customer only where he

has been engaged to do so by a contract of appointment or em

ployment which may be either express or implied 12 C J S 12

The right of a broker to recover commissions or other remunera

tion for his services must be predicated on a contractual relation

he must have been employed to negotiate the contract or trans

action in connection with which his services were rendered and

the employment must have been by the person from whom the

commission is claimed or by some one acting for him Where there

is no employment or binding contract for the payment of com

missions and the broker acts as a mere volunteer he is not entitled

to compensation for his services although such services are the

efficient cause of bringing the parties together and they result in

a sale or other contract between them 12 C J S 60

The court in American Union Transport v United States supra

stated p 613

The appointment of AUT the forwarder as a broker by Central the

shipper could not create any liability on the part of the ocean carriers

There was no agreement by the carriers authorizing the appointment and

certainly no agreement by the members of the Conference to incur liability

to AUT with whom it had engaged in competition for the very business for

which it now claims compensation by way of reparations AUT was not the

broker for the carriers to obtain the contract and there was no agreement

at any time between AUT and the members of the Conference to p y

brokerage

As previously stated in almost every instance shown of record

the services of forwarders are engaged by the shippers or con

signees of the cargo and there is no indication that any contrac

6 F M B
348 FEDERAL MARITIME BOARD

tual r

lationships exist between the forwarders as such and 

riers The rates of ocean carriers generally apply atship s tac

and it is the duty of the shipper to bring the cargo alongside 

vessel ready for shipment and not that of the ship See Amer

Union Transport v River Plate Brazil Confs supra at 

The services of forwarders detailed above are almost ent

directed toward performance of the shipper s duty Much st

is laid in the briefs and in the testimony upon the fact that 

the duty of the carrier under the Harter Act 46 V S C 193 

the Bills of Lading Act 49 V S C 100 to issue bills of lading 

that in preparing bills of lading the forwarders are acting 

behalf of the carriers See In re Gulf Brokerage and Forwar

Agreements supra at 534 5 and Puerto Rican Rates 2 U S 

117 133 1939 This duty of the carriers is accomplished 

ever by the issuance of an original bill of lading for each s

ment The record here discloses on the other hand that fo

use of the shipper a number of copies of the bill of lading 

required as many as 25 or 30 that the bills of lading are prep

at the request of the shipper that a charge for this servic

ordinarily made to the shipper and that in no instance are 

forwarders employed by the carriers to perform this func

The benefits to the carriers from this service are therefore m

incidential to the needs of the shippers

In the light of the comprehensive record made herein it is 

cluded that except in those rare instances in which forwar

are retained by carriers under either express or implied a

ments to secure spot cargo forwarders are not brokers 

urged by some that the long accepted definitions of broker 

brokerage as such are no longer valid in relation to the ser

performed by forwarders Brokers are specifically named in 

tion 16 of the Act among those who are forbidden to obta

attempt to obtain rebates and there is no indication that this 

was used by the Congress in any other than its accepted s

Settled principles of law are not so lightly discarded

Brokerage practices In the great majority of instances st

ship confer nces limit by agreement the payment of brokerag

114 percent of the ocean freight charges and all carriers mem

of such conferences pay brokerage at such rate Only two 

stances of deviation from this rate are shown The North Atla

Continental Freight Conference tariff permits the paymen

brokerage at 1 percent on rates up to and including 19 99 

ton 2112 percent on rates of 20 up to and including 22 99 

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 349

ton and 5 percent on rates of 23 per ton or over

4

These higher

rates of brokerage are required by severe competition from non

conference lines which in this trade pay brokerage as high as 10

percent The Pacific Coast European Conference tariff limits the

paYment of brokerage on grain and grain products to 34 of 1 per

cent on lumber and open rate commodities to 1 percent and on

certain commodities included in a net rate list prohibits the pay

ment of brokerage These tariff provisions were atissue in Pacific

Coast European Conf Payment of Brokerage supra and the

Board found that the prohibitions and limitations on brokerage to

less than 114 percent were similar to those condemned in Agree

ments and Practices re Brokerage supra but withheld action with

respect thereto pending the outcome of the instant proceedings

In the trades from the Pacific Coast to East and South Africa

and to Australia the carriers by individual action do not pay

brokerage The evidence is that in the event anyone of the car

riers in those trades commenced the payment of brokerage the

the others in order to remain competitive would need to do like

wise Non conference carriers generally pay brokerage at the

rate of 2V2 percent although there are instances cited of record

where brokerage payments as high as 16 percent were made and

the non conference carriers consider their higher rates of broker

age as a competitive advantage

Steamship conferences as indicated above generally fix the

upper limits of brokerage rates They recognize that brokerage

paYments are a competitive device to attract cargo to a particular

steamship line and that in the absence of agreed limits if maxi

mum rates of brokerage were left to the individl l action of the

carriers brokerage would soon get out of hand

Methods of payment of brokerage In the majority of in

stances forwarders present invoices to carriers for brokerage

claimed and are paid by the carriers on the basis ofthese invoices

Generally the carriers check only to insure that the shipments

invoiced actually moved and that no more than one brokerage

payment is made on anyone shipment The carriers make no

effort to ascertain that the forwarders have performed any serv

ices withrespect to any shipments and do not attempt to determine

Tariff No 24 of the North Atlantic Continental Freight Conference of

which official notice is taken pursuant to Rule 13 g of the Board s Rules

of Practice and Procedure 46 CFR 201 227 increased the respective upper

limits of the rates effective January 1 1960 to 2199 24 99 and 25 or

over

6 F M B
350 FEDERAL MARITIME BOARD

whether there are any relationships between forwarders and t

shipper clients which would make the payment of brokerage 

the shipments of such shippers rebates in violation of section 

of the Act The carriers insist that they rely primarily upon 

fact that a particular forwarder is registered with the Board 

it is impossible for them to inquire into any possible relations

of forwarders with the shipper and an onerous burden would 

imposed upon them were they to be required to ascertain whe

the forwarders actually performed any services on shipments 

which brokerage is claimed in view of the great number of s

ments handled by the forwarders

With the recent development of machine accounting syste

several carriers have instituted an automatic method of paym

of brokerage Under this method all bills of lading showing 

their face that a

registered forwarder is in any way conne

with the shipments are colle ted together information show

the name of the forwarder the bill of lading number and 

ocean freight charges are transcribed to machine records com

tations as to the amount of brokerage due are automatically m

and checks issued to the forwarders all without requiring 

forwarders to submit any claims or invoices for brokerage T

automatic method of payment results in cost savings to the 

riers in that it eliminates the necessity of checking numerous 

warder invoices against carrier records and is regarded by s

as a favorable competitive device in that it results in more pro

payment of brokerage to the forwarders

The present regulations 46 CFR 244 135 prohibit forward

from receiving brokerage in cases where payment thereof w

constitute a rebate or from sharing any part of the broker

5

This sections provides

244 13 Brokerage No forwarder after the date on which he is require

register shall accept brokerage from ocean carriers unless and until 

forwarder has been assigned a

registration number pursuant to these r

Registration shall not entitle a forwarder to collect brokerage from a 

mon carrier by water in cases where payment thereof would constitu

rebate Le where the forwarder is a shipper or consignee or is the selle

purchaser of the shipment or has any beneficial interest therein or w

the forwarder directly or inJirectly controls or is controlled by the sh

or consignee or by any person having a beneficial interest in the shipm

A forwarder shall not share any part of the brokerage received from a 

mon carrier by water with a shipper or consignee No fowarder shal

mand or accept brokerage during the period his registration number is u

suspension or after his registration number has been cancelled pursuan

these rules

6 F M 
FREIGHT FORWARDER INVESTIGATION ETC 351

with a shipper or consignee In an attempt to insure that so far

as possible the carriers will be protected against inadvertent

rebates they generally require a certifkatioh on the invoices of

forwarders to the effect that in compliance with section 16 of the

Act payment by the carrier and acceptance of brokerage by the

forwarder are on the strict understanding that no part of the

brokerage shall revert to the shipper or consignee and that the

business of the forwarder is in no sense subsidiary to that of the

shipper or consignee In the case of automatic brokerage pay

ments the checks of the carriers include a similar certification as

a part of the endorsement which must be executed by the for

warders when negotiating the checks The record leaves little

doubt that these certificates are executed indiscriminately by the

forwarders and that the present regulation and the certificates

are ineffective in preventing rebates direct or indirect in cases

where forwarders provide forwarding services free of charge to

their shipper clients as in American Union Transport v River

Plate Brazil Confs supra or in cases where there is an identity

of interest between a particular forwarder and his shipper clients

as in Samuel Kaye Collection of BrokeragejMisclassification

supra and Luis Louis A PereirarCollection of Brokerage

supra

Some shippers have requested that the carriers of their ship

ments do not pay brokerage to the forwarders employed by them

So far as the record discloses these requests are honored by the

carriers A number of shippers as indicated above perform on

their own behalf all of the services normally provided by for

warders Such shippers do not receive brokerage payments Some

of these shippers testifying of record herein are of the opinion

that in the performance of forwarding services their activities

redound to the benefit of the carriers in exactly the same manner

as the normal operations of forwarders and that if the forwarders

are entitled to brokerage the shippers are entitled to the same

privilege All parties of record recognize that the direct or in

direct payment by a carrier to a shipper of any portion of the

ocean freight charges would constitute an unlawful rebate in

violation of section 16 of the Act See Payments to Shippers by

Wis Mich Steamship Co 1 U S M C 744 1938 and Rates

Charges and Practices of L A Garcia and Co 2 U S M C 615

1941 See also Lehigh Valley R R Co v United States 243

U S 444 1917 involving asimilar situation under the Interstate

Commerce Act

6 F M B
352 FEDERAL MARITIME BOARD

Unearned b1 okerage The record discloses a number of 

stances in which brokerage in substantial amounts is paid 

carriers to forwarders on shipments as to which the forward

have done little or no work The circumstances under which 

forwarders employed by Ford Motor Company Monarch F

Foods and Studebaker Packard Corporation receive broker

have previously been detailed Anderson Clayton and Comp

the largest cotton shipper in the Gulf performs all of its 

forwarding services at New Orleans and Houston and the an

ocean freight charges paid are about 5 million Forwarders 

form no service whatever on the great majority of the shipme

However Anderson Clayton certifies 10 forwarders in Hou

and 20 in New Orleans on a rotating basis for the payme

brokerage

Balfour Guthrie Company Ltd exports shipments thro

the port of New York on which its annual freight charges 

about 1 million Itmaintains an export department by whic

forwarding services are largely performed Since 1945 its fre

forwarder has been Nyos Incorporated From 1948 until a

1955 Nyos performed no services whatsoever on these shipm

but was furnished with a

copy of all ocean bills of lading on 

basis of which Nyos collected brokerage from the carriers Be

ning in 1955 Nyos took overthe function of performing messe

service for Balfour Guthrie in connection with the forwardin

shipments with the remainder of the forwarding work still b

performed by Balfour Guthrie Nyos is paid for the messe

service an amount in excess of the cost to Balfour Guthrie fo

same service Nyos continues to receive brokerage on all the 

ments The vice president of Balfour Guthrie and the contro

stockholder of Nyos are husband and wife respectively

H A Gogarty Inc a forwarder performs forwarding 

ices for American Paper Exports Inc atNew Orleans for w

it receives forwarding fees At New York forwarding ser

on shipments moving through that port are all performed b

shipper After completion of the shipments a list of the 

ments and applicable freight charges are furnished to Gogar

the New York shipments in order that Gogarty may c

brokerage thereon even though the forwarder has performe

services American Cyanamid Company has an annual fre

bill of from 2 to 3 million and does all of its own forward

but certifies M J Corbett Co as its forwarder for the pay

of brokerage Corbett s only service is that it occasionally 

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 353

information to the shipper about available carrier services with

out charge Nestles Products has an office at San Francisco which

performs all of the forwarding on shipments moving through that

port but it certifies its New York forwarder Fred P Gaskell

Co for payment of brokerage on the San Francisco shipments

Gaskell does not maintain an office on the West coast

There is reference in the record to additional instances in

which similar practices are followed The shippers apparently

permit the collection of unearned brokerage by their forwarders

as a good will gesture or as a favor although in some of the in

stances cited the receipt of unearned brokerage constitutes direct

or indirect rebates The record contains no direct evidence as to

why the carriers continue the payment of unearned brokerage

but the inference is unavoidable that the forwarders to whom it is

paid control the routing of important cargo of othershippers and

that these forwarders are in a position to divert such cargo away

from any carrier who would refuse payment of brokerage

Domestic trades Brokerage is not paid by the carriers in the

domestic trades such as those between the continental United

States and Hawaii and Puerto Rico regulated by the Board and

the coastwise and intercoastal trades regulated by the Interstate

Commerce Commission In these trades rate regulation is much

more comprehensive than in the case offoreign trades Brokerage

in the domestic off shore trades subject to regulation by the Board

is generally prohibited by the conference agreements

Cargo documentation is generally less complicated in the

domestic trades in that no export declarations are required in

the Hawaiian trade and in the Puerto Rican trade need not be

authenticated by the Customs Bureau prior to loading of the

cargo no consular invoices or export licenses are required and

there are no currency exchange problems There are a limited

number of carriers in these trades and their schedules and

itineraries are widely known

As a result ofthe non payment of brokerage the forwarders do

not generally solicit traffic in the domestic trades and there is

evidence to the effect that forwarders will refuse to handle ship

ments in these trades except as an accommodation to those of

their shippers who also export in foreign commerce Bills of

lading are generally prepared by the carriers and other forward

ing services are performed by the shippers themselves or by

the carriers at charges stated in their tariffs For example

United States Atlantic Gulf Puerto Rico Conference Outward

6 F ld B
354 FEDERAL MARITIME BOARD 

Freight Tariff No 7 in item 18 names service charges cove

the preparation and handling of extra copies of bills of lad

preparing and clearing export declarations preparing and 

pleting drafts or commercial invoices arranging for transfe

cargo from terminal inland carrier to carriers pier and secu

permits

Competition and comprehensive regulation in the dom

trades tend to hold the freight rates to relatively low levels 

carriers engaged in the Puerto Rican trade supported by 

Commonwealth of Puerto Rico express the fear that were 

carriers now to be prevented from prohibiting the payme

brokerage the added expenses occasioned by brokerage paym

to forwarders would require immediate increases in the fre

rates There is no indication that commerce in the dom

trades is adversely affected by the existing prohibitions ag

the payment of brokerage and the forwarders have expre

little or no interest in these trades

Positions of pnrties rega1 ding brokerage There is a wea

testimony from carriers forwarders and public bodies to 

effect that brokerage payments constitute compensation by 

carriers for the performance by forwarders of services of 

to or redounding to the benefit of carriers particularly the 

ices of booking cargo or otherwise arranging cargo space s

tation of traffic coordination of cargo movement to ship

preparation and processing of bills of lading preparation 

processing of dock receipts and delivery orders preparation 

processing of consular documents or export declarations and 

ment of ocean freight charges When pressed however no

the witnesses could specify with particularity any service w

was performed for the carriers with the exception of the p

ration of the bills of lading It has previously been found 

in the performance of this function the forwarders are a

for their shipper clients The carriers likewise testified u

mously that the brokerage rate of 114 percent solely by re

of its long standing was fair and reasonable In fact no 

vidual carrier other than those engaged in the Pacific C

East and South Africa trade where no brokerage is paid opp

on this record the payment of brokerage to forwarders

Conference chairmen and officials on the Atlantic and 

Coasts generally supported the payment of brokerage exce

those instances where prior to the decision in Agree11l ents 

Practices Re Brokerage supra the conference agreements 

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 355

contained a prohibition against such payment On the other hand

the conferences on the Pacific Coast which had prior to that deci

sion generally prohibited the payment of brokerage except on

overland shipments which were susceptible of movement by any

coast generally opposed the payment of brokerage The majority

of all conference officials however were of the opinion that rates

of brokerage should be left to conference action rather than be

held to astated minimum by Board action

The testimony above summarized which occupies a substantial

portion of the record herein lends little to a determination of the

actual reasons for and the nature of brokerage payments In our

complex economy the successful fruition of any particular busi

ness endeavor depends upon the efficient performance of many

related activities Thus the carriers benefit as much from the

efficient performance by inland carriers of port lighterage and

port delivery services as they do from the efficient functioning of

the forwarder industry Brokerage however is paid only to the

latter It must be concluded that brokerage does not constitute

compensation by the carriers for any of the services of the for

warders since the services of the latter must necessarily be per

formed for the shippers in order to bring shipments into position

for export

The overwhelming conclusion drawn from the record as awhole

as found by the Examiner is that brokerage is primarily a com

petitive device utilized by the carriers to attract to themselves

as much as possible of the traffic as to which the forwarders by

authorization of their shipper clients control the routing It is

app rent that to the extent that brokerage payments by all mem

bers of carrier conferences are generally limited to 1 percent

the competitive impact of brokerage is largely nullified It comes

into play only in preventing anyone carrier by individual action

from refusing to pay brokerage since such a carrier would im

mediately be faced with diversion away from it of all traffic con

trolled by the forwarders to the maximum extent possible

Effect of brokerage prohibitions upon commerce As stated in

the order in Docket No 831 it was held in Agreements and Prac

tices Re Brokerage supra that conference agreements in foreign

commerce which prohibit the payment ofbrokerage or limit brok

erage payments to less than 114 percent of the ocean freight

charges would be detrimental to the commerce of the United

States within the meaning of section 15 of the Act and this deci

sion was thereafter followed by our predecessors until it was

6 F M B

732 047 0 64 24
356 FEDERAL MARITIME BOARD

announced in Pacific Coast European Conf Payment of Bro

age supra that action looking to a reconsideration thereof w

be taken

The record has been searched in vain for any probative evid

indicating that the prohibition of brokerage payments would 

any adverse or detrimental effect upon the foreign commerc

the United States limiting the definition of foreign commerc

the actual movement of goods in the export trades and the 

motion and development of such trades There are nume

general assertions in the record by forwarders and others 

if brokerage is eliminated entirely the forwarders will perf

need to increase their charges to shippers in order to recoup 

lostrevenues that numerous commodities move in export on w

the profit margins are narrow which could not stand the im

tion of increased forwarding charges and that the moveme

such commodities would thus be adversely affected No sh

testimony to this effect was adduced and the shipper testim

of record from shippers who perform their own forwarding 

ices and do not receive brokerage indicates to the contrary

The record in fact supports the conclusion that increased 

warding charges to the extent necessary to provide full com

sation to the forwarders and a reasonable profit should ha

substantial deleterious effect upon the movement of goods 

port Such increases in forwarder charges establishe

compensate for the loss of brokerage would not have an ad

effect on our export commerce In all trades in recent year

creased costs of the carriers have compelled substantial incr

in ocean freight rates in excess of 1 percent without notic

decreases in traffic attributable t this cause alone There a

this connection numerous staterneats on the record by ca

and conference officials that brokerage payments as such a

reflected in the ocean freight rates and that the cessation o

payments would not induce an immediate concurrent decre

the rates They recognize however that brokerage paymen

items of expense to the carriers and it is reasonable to a

that if relieved of this expense the impact of other cost incr

would be minimized and that ultimately the savings realiz

the carriers from the cessation of brokerage payments wo

reflected in rates which would be lower relatively This as

tion is borne out by the position of the carriers in the P

6 
FREIGHT FORWARDER INVESTIGATION ETC 357

Rican trade who show that increased expenses by reason of brok

erage payments would necessitate rate increases in that trade

The carriers generally fear that were the forwarding industry

to be crippled the necessary functions performed by the for

warders on behalf of their shippers would need to be performed

in large part by the carriers themselves In this connection it is

necessary to point out here that as stated above ocean freight

rates generally apply at ship s tackle and the carriers obliga

tions in return for the freight charg s are limited to the receipt

transportation and delivery of tendered shipments It is the duty

of the shipper as pointed out in American Union T1 ansport v

River Plate Brazil Conls supra to perform all of the functions

normally performed by a forwarder to bring cargo alongside a

vessel ready for shipment and this finding was expressly upheld

in American Union Transport v United States sup1a at p 612

It necessarily follows therefore that if brokerage payments pro

viding the sole compensation for the performance of for arding

functions constitute an indirect rebate to the shipper in violation

of section 16 of the Act the performance of such functions by

the carriers for shippers free or at non compensatory charges

would result in direct rebates likewise in violation of the statute

Cf P1op1 iety 01 Operating P1actices N elV York Wa1ehousing

198 IC C 134 216 IC C 291 The testimony of carriers upon

this point generally recognizes that if carriers were required to

perform forwarding services they would be entitled to establish

charges therefor and the statute would require that such charges

be compensatory

Many forwarders testified at length concerning the probable

impact upon their operations should they lose the revenues re

ceived from the carriers in the form of brokerage payments This

impact would undoubtedly be severe since it has previously been

found that as awhole in the forwarding industry fees charged to

the shippers do not fully cover the costs of forwarders for the

services performed by them The forwarders point to the efforts

of some members of their industry directed to the promotion of

foreign trades which they contend will be hampered by losses

in revenue from brokerage but the impact of these efforts upon

the foreign commerce of the United States has heretofore been

found to be negligible and stem largely from the sales efforts of

the forwarders in the furtherance of their own pursuits which

can logically be expected to continue

6 F M B
358 FEDERAL MARITIME BOARD

DISCUSSION AND CONCLUSIONS

Jurisdiction As indicated at the outset several conte

relating to the jurisdiction of the Board have been raised b

forwarders The first of these to the effect that we have no 

tory authority to institute a rule making proceeding per se 

section 4 of the Administrative Procedure Act was spec

overruled in Proposed Rules Governing Freight Forwa1 

supra and has been rendered moot by the consolidation o

rule making proceeding with the proceeding in No 765 an in

gation to determine the lawfulness of the practices of forwa

with the view of amending or supplementing General Ord

as may be warranted by the record The forwarders agree 

upon findings of unlawfulness we are authorized to issue 

under the Act prescribing corrective action for the future 

California v United States 320 U S 577 1944

The forwarders further contend that brokers are not pe

subject to the Act as held in In re Gulf Brokerage and For

ing Agreements supra and that we have no authority to 

lish definitions for broker brokerage or brokerage ser

These contentions are based upon the premise that forwarde

relation to carriers are brokers which premise was here

found to be erroneous in law and in fact As was held by the 

in American Union Transport v United States supra at 61

Even if it be true that the Conference has heretofore paid bro

wherever the broker forwarder was identified with the cargo no 

exists why the Board under its broad power should not have autho

distinguish between the services of a broker and those of a freig

warder

It is further contended that we lack jurisdiction under s

15 of the Act to review agreements by carriers prohibiting 

erage or limiting it to less than 114 percent of the freight ch

on the ground that such agreements are designed merely t

vent the expenditure of funds which in the absence of such 

ments would be expended and are therefore not the ty

agreements contemplated by the statute Section 15 of th

specifically authorizes approval of agreements regulating c

tition between carriers and this record establishes conclu

that the payments by carriers to forwarders are utilized b

carriers as a competitive device and are recognized by th

such In the circumstances our jurisdiction is clear

Discrimination preference and preiud1 ce and unreaso

practices by forwarders Section 16 First of the Act ma

6 
FREIGHT FORWARDER INVESTIGATION ETC 359

unlawful for forwarders as persons subject to the Act directly

or indirectly to make or give apy undue or unreasonable prefer

ence or advantage to any particular person or description of

traffic in any respect whatsoever or to subject any person or

description of traffic to any undue or unreasonable prejudice or

disadvantage Section 17 of the Act which is particularly appli

cable to the activities of forwarders as found by the Supreme

Court in U S v American Union Transport supra requires that

forwarders shall establish observe and enforce just and reason

able regulations and practices relating to or connected with the

receiving handling storing or delivering of property and pro

vides that whenever the Board finds that any such regulation or

practice is unjust or unreasonable it may determine prescribe

and order enforced a just and reasonable regulation or practice

The record compels the conclusion that in the assessment of

charges by forwarders to their shippers the practice of discrimi

nation preference and prejudice is the rule rather than the excep

tion The charges vary from shipper to shipper for identical

services some shippers receive forwarding services free of charge

or at nominal charges and in billing for accessorial services such

as insurance and carting most New York forwarders who con

stitute the majority by far practice unlimited discrimination in

that disguised markups in some cases are added in varying

amounts and in others are not added with no apparent regard

for cost of service or any other factors which should enter into

the establishment and maintenance of just and reasonable charges

Such practices are prima facie discriminatory Contract Rates

Japan Atlantic Gulf Freight Conf 4 F M B 706 735 1955 and

Contract Routing Restrictions 2 U S M C 220 225 1939 and

are thus unreasonable in the absence of justification therefor

Rather than offer any justification for their practices as shown

in the assessment of their charges most forwarders opposed on

the record any attempt to inquire into the levels of their charges

and the methods of assessment on the ground that it would dis

close the confidential relationships between the forwarders and

their shipper clients There can be nothing private or confidential

in the operations of a carrier engaged in interstate commerce

U S Atlantic and Gulf Puerto Rico Rate Increase 5 F M B 426

1958 and the same is true with regard to any industry operat

ing in a public calling and regulated by the Congress in the public

interest to the extent that the operations are made subject to

regulation Smith v Interstate Com Comm 245 U S 33 1917

6 F M B
360 FEDERAL MARITIME BOARD

Rebates It is now well settled that the performance 

freight forwarder of forwarding services free of charge 

shipper and the concurrent receipt by the forwarder ofbrok

from the carriers for the handling of the shipments cons

an indirect rebate to the shipper American Union Transp

United States supra The forwarders contend that the ho

of the court in that case should be narrowly construed o

ground that it related to a specific set of facts surroundin

cific shipments and covered the operations of only one forw

with respect to those particular shipments To the contrar

record discloses that the forwarding services performed i

I case are the normal services performed by all forwarders 

that the relationship between forwarder and carrier there 

is the normal relationship between forwarders and carriers

This record discloses that of the 1 273 forwarders respo

of which 283 did not actively engage in forwarding during 

226 or almost 23 percent of the active forwarders in 195

formed some free forwarding Rebating of this type the

cannot be said to occur only in isolated cases Even more 

lent is the furnishing of forwarding services by forward

shippers at nominal charges or at charges below the costs o

services There is no real distinction except in degree be

the furnishing of forwarding services free and the furnish

such services at nominal charges such as 1 cent and 10 cen

shipment in the case of the General Services Administratio

tracts shown or at charges lower than cost If the former c

tutes rebating the latter does likewise since the overall re

that the shipper to the extent that brokerage payments sub

the cost of forwarding services performed for him receiv

transportation for less than the rates and charges regularly 

lished and maintained by the carriers See Lehigh Valley R 

v United States supra

The forwarders are generally agreed that the furnishi

forwarding services free or at non compensatory rates is imp

and that some action should be taken to prohibit this practic

they proposed no rules to accomplish this purpose or sug

any other action than the exercise of our power in situatio

this character to prescribe minimum charges for the forwa

The record also supports the conclusion that some carri

the foreign export trades though not identified of record e

regularly in the performance of forwarding services for shi

6 
FREIGHT FORWARDER INVESTIGATION ETC 361

and for some forwarders free of charge As previously indicated

such practices constitute direct rebates

Agreements The record leaves little doubt that there are

numerous arrangements between forwarders under which a for

warder at one port who controls the routing of a shipment refers

that shipment to a forwarder at an out port the latter completes

the forwarding services necessary and brokerage and other fees

are divided between the two The forwarders contend that these

arrangements are not agreements of the type contemplated by sec

tion 15 of the Act as requiring prior approval They argue that

the statute is directed principally to agreements which purport

to regulate competition as between two or more persons subject

to the Act Section 15 provides among other things that all agree

ments controlling regulating preventing or destroying competi

tion pooling or apportioning earnings or providing for exclusive

preferential or cooperative working arrangements between per

sons subject to the Act shall be filed for approval and that

operations under such agreements shall be unlawful until they are

approved

The agreements between forwarders here under consideration

fall within these provisions To the extent that referral to one

forwarder at an outport is accomplished under such an agreement

other forwarders are denied an opportunity to compete for the

traffic The arrangements constitute cooperative working arrange

ments between the forwarders parties thereto for the performance

of forwarding services The arrangements contemplate in almost

every instance cited of record a division of the revenues accruing

from the performance of forwarding services between the for

warders parties thereto on an agreed basis As shown a number

of such agreelnents or arrangements have been filed for approval

and no forwarder has questioned our authority to act under the

statute with respect thereto The forwarders contend that since

there may be a large number of such agreements in existence the

filing of them will create a burden for the forwarders and for us

The statute clearly places upon the parties to such arrangements

the duty of filing them for approval and proscribes operations

thereunder until approval has been secured We are required by

the Act to take action with respect to such filings and we may not

shirk thisduty because of its magnitude

No parties to the proceedings have made mention of the

arrangements shown of record between some forwarders and some

carriers under which carriers perform the completion of forwald

6 F M B
362 FEDERAL MARITIME BOARD

ing services at outports for forwarders These arrangemen

likewise cooperative working arrangements required by the 

ute to be filed

The record does not indicate with particularity the part

the arrangements of both types which are in existence but 

be concluded that the practices are rather widespread A

warders and all carriers engaged in foreign commerce in th

bound trades from the United States its territories and p

sions and the Commonwealth of Puerto Rico are responde

one or the other of the proceedings here involved All such 

ments should be filed with us pursuant to Section 15

Brokerage This record discloses that the payment by ca

of so called brokerage to forwarders who render freight for

ing service to shippers of the cargo leads the forwarders in

practices of discrimination preference and prejudice as 

above that such payments almost always result in indirect r

to the shippers through the performance by forwarders o

warding services free or at non compensatory rates or ch

that consequently the payment of brokerage by carriers 

unjust and unreasonable practice related to or connected wi

receiving handling storing or delivering of property proh

by section 17 of the Act It follows that the payment of an

or commissions to forwarders in connection with cargo 

respect to which they render freight fonvarding service b

riers must be prohibited As to the inevitability of rebating 

the present practices of forwarders it has previously been 

that at present in the forwarding industry as a whole forwa

fees charged by forwarders to shippers do not fully cover the 

of performance by the forwarders of their forwarding se

for the shippers This is tacitly recognized in the brief of o

warder Universal Transport Corporation which states

For many years commission on freight paid by carriers to forw

compensated forwarders for their services to shippers consigne

carriers The practice is an open one known to all parties concern

connected with the export of goods It has reduced to a nominal sum 

part completely eliminated forwarding as a cost in the export of Am

products

Reconsideration of prior decisions in No 831 The pr

basis for the prior decisions in holding that conference prohib

against the payment of brokerage or limiting brokerage 

than 114 percent of ocean freight charges would be detrim

to the commerce of the United States is found in the find

6 
FREIGHT FORWARDER INVESTIGATION ETC 363

Agreements and Practices Re Brokerage supra atp

177 that such

conference actions had had and will have a serious effect upon the

forwarding industry This finding can be supported on this record

as urged by the forwarders and a number ofother parties but only

if it is assumed that forwarding fees must remain at unremunera

tive levels with resulting indirect rebates to shippers and general

disregard of the requirements of section 16 of the Act prohibiting

rebates discrimination preference and prejudice On the other

hand the unregulated payment of brokerage has resulted in sub

stantial payment by the carriers of unearned brokerage as dis

closed on this record with consequent unnecessary dissipation of

carrier revenues creating upward pressures upon ocean freight

charges to the detriment of the commerce of the nation

In addition the prior decisions failed to recognize the true

nature of brokerage of the type here involved as voluntary pay

ments made by the carders as a competitive device to attract

traffic or as a protective device to prevent the diversion of cargo

over which the forwarders have control of routing The con

tinuance and recurrence of the widespread rebating resulting

therefrom which this record shows to exist must cease The safe

guards included in the prior decisions to insure that an individual

carrier should be free to payor not to pay brokerage as it sees

fit are according to this record generally of no avail in view of

the competitive pressures which prevail in the event that any

brokerage is paid in atrade There is in logic no sound reason why

carriers acting in concert should be free to limit or regulate com

petition among themselves by imposing upper limits upon rates of

brokerage but at the same time be prevented from limiting or

regulating competition among themselves by prohibiting in its

entirety the payment of brokerage

This record discloses with certainty that brokerage payments

lead indirectly through the forwarder recipients to undesirable

and unlawful practices It must be concluded therefore that the

prior findings under reconsideration in No 831 are no longer valid

and are overruled

In addition in view of our findings above as to the violations of

sections 16 and 17 of the Act which result from the payment of

brokerage and the consequent necessity for the imposition of a

rule prohibiting such payments in connection with cargo with

respect to which the freight forwarder renders freight forwarding

service the prior findings would be of no further material effect

6 F M B
364 FEDERAL MARITIME BOARD

Rules In California v United States supra it was held 

when our predecessor the Maritime Commission found a b

of the duty imposed on those subject to the Shipping Act 191

section 17 of the Act the Commission was authorized and ch

with aduty to determine and prescribe ajust and reasonable 

lation and order it enforced We have found abreach of this 

to establish observe and enforce just and reasonable regula

and practices relating to and in connection with the han

storing or delivering of property We have further found 

existing practices on the part of both forwarders and co

carriers relating to and in connection with the receiving han

storing and delivering of property are unjust and unreasonab

The report ofthe Examiner contains acomprehensive discu

of the rules originally proposed by us the positions of the p

with respect thereto and amendments proposed by them the 

proposed by Public Counsel and those recommended to us b

Examiner Itis clear that the Examiner because ofhis view 

the prohibition of brokerage constitutes a drastic remedy 

should not be resorted to until all other measures have f

attempted to devise rules which in his opinion would wi

cooperation of the forwarding industry eliminate the viol

oflaw which have been shown to stem from the payment ofb

age by the carriers We are convinced that such half measure

not suffice and are of the opinion that the widespread re

and discrimination here shown cannot reasonably be expec

cease without the total prohibition of brokerage payments t

warders in connection with cargo with respect to which 

render forwarding service The nature of the brokerage pra

and the practices of the forwarders in connection therewit

the obvious attractions of inherently unearned compensati

quire this conclusion

The Examiner proposed a rule requiring the establishm

minimum freight forwarding fees by forwarders in orde

such fees should not fall below renlunerative levels with res

indirect rebates ofbrokerage received by forwarders from ca

and to eliminate discrimination preference and prejud

found to exist in the charges of forwarders to shippers 

practices stem almost entirely from the brokerage practice

elimination of the latter as found by us to be necessary 

result in the establishment by the forwarders of realistic for

ing fees We feel that the forwarders should in their man

discr tion be free to recast their charges to their clients aft

6 
FREIGHT FORWARDER INVESTIGATION ETC 365

continuance of brokerage without prejudice to further action by

us with respect thereto upon complaint or upon our own initiative

should it be brought to our attention that the discriminations have

not been eliminated

There is set forth in theAppendix hereto the revision of General

Order 72 which we find to be necessary The rules reflect anumber

of the suggestions made by the parties hereto and have been re

vised to eliminate redundancy They are largely self explanatory

and discussion herein will be limited to the most important fea

tures thereof The definition of freight forwarder is similar to

that originally proposed In view of the lack of authority on the

part of the Board to regulate entry into the business of freight

forwarding as previously indicated the suggestions that only

independent freight forwarders be permitted to operate cannot be

given effect

The definitions of broker brokerage and brokerage service are

revised to conform with the recognized and settled principles of

law referred to heretofore Although the suspension or cancella

tion of registration numbers need not be made subject to notice

and hearing since the registration numbers do not constitute

licenses to do business but are issued only to insure that those

engaging in the forwarding business are made known to the Board

we feel that notice and an opportunity to be heard should be ac

corded before a registration is cancelled or suspended Accord

ingly section 244 5 b provides for notice and hearing in such

cases

In section 244 5 d registration is confined to the issuance of

only one registration number to a particular forwarder or only

one of agroup offorwarders under common control The possibili

ty of discrimination is obvious should recognition be granted to

more than one business entity in such circumstances

In section 244 7 the present regulations relating to the billing

practices of forwarders are brought forward and modified to pro

hibit the assessment of disguised markups in all instances which

are shown on this record to result in violation of sections 16 and

17 ofthe Act

Section 244 13 relating to brokerage payments reflects our con

clusions above that the receipt by forwarders and payment by

carriers of brokerage in connection with shipments as to which the

forwarders have performed forwarding services is violative ofthe

statute and is intended to prohibit brokerage payments in such

instances The provisions are not intended to prohibit the payment

6 F M B
366 FEDERAL MARITIME BOARD

of brokerage in those instances where the recipient has no 

connection with the cargo than to perform the true functio

a broker Despite the fact that section 244 14 ofthe rules am

in effect to a restatement of the requirements of section 15 

Act we feel that they will serve to impress upon the forwa

the statutory requirements in view of the fact that a

copy 

rules will be served upon all active forwarders

We are requiring that the revised General Order 72 w

into effect 120 days after promulgation in order to pro

reasonable period of time for the forwarders who will the

be prohibited from receipt of brokerage to revise their char

their clients in order to make up for the consequent l

revenues In fixing the effective date we assume that th

warders will accordingly proceed forthwith

Proposed findings and conclusions and exceptions t

Examiner s recommended decision have been fully considere

except to the extent they are given effect in this report a

regulatory order they are denied and overruled

We conclude and specifically find in the light of the foreg

1 That the performance by forwarders of forwarding se

free of charge or at non compensatory charges on shipments 

ing in the commerce of the United States subject to the Ac

the receipt of so called brokerage from common carriers by 

subject to the Act on such shipments constitute a violat

section 16 ofthe Act

2 That forwarders in assessing varying charges for lik

warding services to their shippers in adding disguised ma

to charges for accessorial services procured for their shipper

in performing forwarding services free of charge or at non 

pensatory charges for some shippers and not for others th

give undue and unreasonable preference or advantage to so

their shippers and subject others of their shippers to undu

unreasonable prejudice or disadvantage in violation of sect

First of the Act and engage in unjust and unreasonable pra

relating to or connected with the receiving handling stori

delivering of property in violation of section 17 of the Act

3 That forwarders have failed to establish observe and e

just and reasonable regulations and practices relating to an

nected with the receiving handling storing and deliver

property and that the practices of forwarders as found i

record relating to and connected with the receiving han

6 F ld B
FREIGHT FORWARDER INVESTIGATION ETC 367

storing and delivering of property are unjust and unreasonable

practices in violation of section 17 c fthe Act

4 That the performance by common carriers subject to the Act

of forwarding services free of charge or at non compensatory

charges on shipments transported by such carriers constitutes a

violation of section 16 Second of the Act

5 That payments by carriers to forwarders of brokerage re

lating to and in connection with the receiving handling storing

and delivering of property res lt in indirect rebates to shippers

through the performance by forwarders of forwarding services

free or at non compensatory rates or charges in violation of sec

tion 16 of the Act and that the payment of brokerage by carriers

to forwarders in connection with cargo with respect to which the

forwarders render freight forwarding services is an unj ust and

unreasonable practice in violation of section 17 of the Act

6 That violations of the Act found herein have occurred regu

larly and unjust and unreasonable practices exi6t relating to and

in connection with the receiving handling storing and delivering

of property as found above and that the rules and regulations

shown in the Appendix hereto are just and reasonable in connec

tion therewith and are determined prescribed and ordered en

forced to prevent the continuance and recurrence of such viola

tions

7 That forwarders and carriers not specifically identified on

the record in all instances have entered into failed to file carried

out agreements or arrangements providing in connection with the

performance of forwarding services for the regulation of com

petition pooling or apportioning of earnings and cooperative

working arrangements and have not secured the approval of the

Board in violation of section 15 of theAct

8 That the findings in the prior decisions cited in the order

in Docket No 831 to the effect that agreements between common

carriers by water subject to the Act prohibiting the payment of

brokerage or limiting the payment of brokerage to less than I

percent of freight charges are or would be detrimental to the

commerce of the United States in violation of section 15 of the

Act are no longer valid Orders in the proceedings cited carrying

such findings into effect will no longer be considered effective

An order discontinuing these proceedings will be entered

6 F M B
368

Sec

244 1

244 2

244 3

244 4

244 5

244 6

244 7

244 8

244 9

244 10

244 11

244 12

244 13

244 14

244 15

244 16

244 17

244 18

FEDERAL MARITIME BOARD

ApPENDIX

RULES

BUSINESS PRACTICES OF FREIGHT FORWARDERS AND

OF CARRIERS IN RELATION THERETO

GENERAL ORDER 72 REVISED

Definitions

Registration

Additional information

Information available to public

Registration numbers

Registration lists

Billing practices

Consolidated shipments

Special contracts

Nondiscriminatory treatment required

Exceptions as to special contracts

Forwarders receipts

Brokerage payments

Section 15 agreements

Carrier performing forwarding services

Penalties for violations

Separability clause

Effective date

AUTHORITY 244 1 to 244 18 issued under sec 204 49 Stat 

amended 46 U S C 1114 sec 19 41 Stat 995 46 U S C 876 Inter

applies 39 Stat 728 46 U S C 814 815 816 820

Sec 244 1 Definitions a Freight forwarder means any person 

in the business of dispatching or facilitating shipments on behalf 

persons by common carrier by water in transportation as defined 

part and of handling the formalities incident to such shipment

definition includes without limitation independent freight forw

common carriers manufacturers exporters export traders manufa

agents resident buyers brokers commission merchants and any ot

sons when they engage for and on behalf of any person other tha

selves in the aforementioned activity

b Common carrier by water means any person engaged in tran

tion as defined in this part

c Transportation means transportation of property by comm

rier by water on ocean going vessels in commerce from the United St

territories and possessions and the Commonwealth of Puerto Rico to 

countries or between the United States its territories and possessio

the Commonwealth of Puerto Rico

d Freight forwarding service means a service rendered by a 

forwarder as defined in this part in the process of dispatching or f

ing shipments on behalf of other persons as authorized by such ot

sons Such services include but are not limited to Examining inst

and documents received from shippers ordering cargo to port p

6 
FREIGHT FORWARDER INVESTIGATION ETC 369

export declarations booking cargo space preparing and processing delivery

orders and dock receipts preparing instructions to truckman or lighterman

and arranging for or furnishing such facilities preparing and processing

ocean bjIls of lading preparing consular documents and arranging for their

certification arranging for or furnishing warehouse storage arranging for

insurance clearing shipments in accordance with United States Government

regulations preparing advice notices of shipments sending copies to bank

shipper or consignee as required sending completed documents to shipper

bank or consignee as required advancing necessary funds in connection

with the foregoing providing supervision in the coordination of services

rendered to the shipment from origin to vessel and giving expert advice to

exporters as regards letters of credit licenses and inspection

e Freight forwarding fee means any compensation paid by the shipper

or consignee or the agent of either who engages the freight forwarder for

the performance of a

freight forwarding service

f Broker means any person not a common carrier by water and not

regularly employed by any common carrier by water who is engaged by

such carrier to sell or offer for sale transportation or who holds himself

out by solicitation advertisement or otherwise as one who negotiates be

tween shipper and carrier for the purchase or sale of transportation

g Brokerage service means securing cargo for a vessel engaged in

transportation as defined in this part by selling transportation or by nego

tiating for the purchase or sale of transportation

h Brokerage or brokerage fee means compensation paid by a com

mon carrier by water for the performance of a brokerage service

i Person includes individuals and corporations partnerships asso

ciations and other legal entities existing under or authorized by the laws of

the United States or any State Territory District or possession thereof

or the Commonwealth of Puerto Rico or any foreign country

Sec 244 2 Registration a Each person who engages in business as a

freight forwarder shall register with the Federal Maritime Board before

engaging in such business Registration shall be accomplished by executing

and filing with the Federal Maritime Board Freight Forwarder Registration

Form FMB 21 set forth in paragraph b of this section which will be

furnished by the Federal Maritime Board upon request All freight for

warders currently engaged in business as freight forwarders and holding

registration numbers heretofore issued by the Federal Maritime Board shall

within 3 days from the effective date of the rules in this part execute and

file with the Federal Maritime Board Form FMB 21 as prescribed in this

part

b Form FMB 21 appended hereto is hereby prescribed for registration

under this section

Sec 244 3 Additional information Registrants shall submit such addi

tional information as the Federal Maritime Board may request from time to

time and shall notify the Federal Maritime Board of any change in facts

reported to it under this part within ten days after such change occurs

Failure to comply with this section by a freight forwarder will be deemed

sufficient reason to cancel his registration

6 F M B
370 FEDERAL MARITIME BOARD

Sec 244 4 Information available to public Information set f

Freight Forwarder Registration Form FMB 21 shall be public info

and available for public inspection at the offices of the Federal M

Board

Sec 244 5 Registration numbers a Each person who intends to 

in business as a freight forwarder and has filed the required informat

be issued a registration number by the Federal Maritime Board after 

nation and verification of the information submitted by him and a de

tion that the issuance of a registration number will not be inconsiste

this part or the Shipping Act 1916 Thereafter such registration 

shall be set forth on the registrant s letterheads invoices advertisi

all other documents relating to his forwarding business The issuan

registration number by the Federal Maritime Board to a freight fo

is for identification and informational purposes and does not mean 

Board has investigated and found that the freight forwarder is q

Use of the e registration numbers in any manner other than to indi

fact of registration with the Federal Maritime Board is prohibited

b A freight forwarder s registration may be suspended or c

after notice and hearing if the Federal Maritime Board finds t

registrant has violated the rules in this part or the Shipping Act 1

c A freight forwarder may not transfer or assign his regi

number

d A freight forwarder shall not be entitled to register under mo

one name or to obtain more than one registration number regardles

number of names under which he may be doing business When two 

entities are owned or controlled by substantially the same interests th

be treated as one entity for the purpose of registration and they shal

entitled to separate numbers

Sec 244 6 Reqistration lists The Board will compile periodica

make available to the public upon request lists of all registrants wi

respective registration numbers

Sec 244 7 Billing practices All freight forwarding shall use inv

other forms of billing which state separately and specifically as 

shipment

a The amount of ocean freight assessed by the carrier

b The amount of consular fees paid to consular authoritieR

c The actual cost to the forwarder of insuring the hipment whe

a policy bought in the name of the shipper or by an open pol icy 01 oth

d The amount charged for each accessorial service performed in 

tion with the shipment

e Other charges

Provided however That freight forwarders who offer to the public a

to forward small shipments for uniform charges available to all an

filed with the Federal Maritime Board shall not be required to item

components of such uniform charges on shipments as to which the 

shall have been stated to the shipper at time of shipment and acce

6 
FREIGHT FORWARDER INVESTIGATION ETC 371

the shipper for payment but if such freight forwarders procure marine

insurance to cover such shipments they must state their total charge for

such insurance inclusive of premiums and placing fees separately from the

aforementioned uniform charge

Sec 244 8 Consolidated shipments In the case of individual shipments

consolidated with other individual shipments the invoice or other form of

billing concerning each shipment shall state the minimum ocean freight and

consular fees that would have been payable on each shipment if shipped

separately and the amounts actually charged for these items by the freight

forwarder on the shipment in question

Sec 244 9 Special Contracts All special agreements or contracts between

freight forwarders and shippers or consignees shall be in writing and shall

be filed with the Board within 10 days after they are signed

Sec 244 10 Nondiscriminatory treatment required To the extent that

special agreements or contracts are entered into by a

freight forwarder with

individual shippers or consignees such freight forwarders shall not deny to

other shippers or consignees similarly situated and whose shipments are

accepted by such freight forwarder equal charges for forwarding and ac

cessorial services to be rendered by the freight forwarder insofar as such

forwarding and accessorial services are similar to those performed for

shippers or consignees holding special contracts

Sec 244 11 Exceptions as to special contracts In the case of special con

tracts whereby the patties have agreed in advance as to the charges for

services in connection with the forwarding of a shipment the invoice or other

form of billing shall refer to the agreement in which event the charges need

notbe itemized

Sec 244 12 Forwarders receipts Freight forwarders receipts for cargo

shall be clearly identified as such and shall not be in form purporting to be

oceancarriers bills of lading

Sec 244 13 Brokerage payments a No common carrier by water shall

pay to a freight forwarder and no freight forwarder shall charge or re

ceive from any common carrier by water either directly or indirectly any

compensation or payment of any kind whatsoever whether called broker

age commission fees or by any other name in connection with any

cargo as to which the freight forwarder has performed any forwarding serv

ice as defined in paragraph 244 1 d of this part

b No freight forwarder may render or offer to render any forwarding

service free of charge or at reduced rates in consideration of the shipper or

carrier agreeing to allow or allowing the freight forwarder to receive broker

age on the shipment

c Common carriers by water when acting in accordance with approved

section 15 agreements or an individual carrier may make rules and regula

tions to assure that brokerage will not be paid under circumstances which

will violate the Shipping Act 1916 or the rules in this part

d No freight forwarder or other person shall collect brokerage from a

common carrier by water and no such carrier shall pay brokerage to any

freight forwarder or other person in cases where payment thereof would

6 F M B

732 047 0 64 25
372 FEDERAL MARITIME BOARD

constitute a rebate such as for example where the freight forward

other person 1 Is the shipper or consignee or is the seller or purcha

purchasing agent of the shipment 2 advances the purchase price 

goods shipped or guarantees payment therefor or has any beneficial in

therein 3 directly or indirectly by stock ownership or otherwise c

or is controlled by the shipper or consignee or seller or purchaser o

chasing agent of the shipment or by any person having a beneficial in

in the shipment or person advancing the purchase price of the goods s

or guaranteeing payment therefor and 4 where the freight forward

the shipper consignee seller or purchaser or purchasing agent or 

advancing the purchase price of the goods shipped or guaranteeing pa

therefor are owned or controlled by substantially the same interests

e No freight forwarder shall share directly or indirectly any p

the brokerage deceived from a common carrier by water with a s

consignee or an employee of a shipper or consignee or seller or pur

or purchasing agent of the shipment or person advancing the purchas

of the goods shipped or guaranteeing payment therefor or with any 

having a beneficial interest inthe shipment

f No common carrier by water shall pay brokerage to a freigh

warder or other person when receipt of such brokerage by the freig

warder is prohibited by the rules in this part or the Shipping Act 

as amended

Sec 244 14 Section 15 agreements a Copies of itten agreemen

true and complete memoranda of oral agreements between a freig

warder and another freight forwarder or carrier or other person 

to the Shipping Act 1916 or modifications or cancellations thereof 

relate to one or more of the following subjects must be filed with the 

1 Fixing or regulating transportation rates or fares

2 Giving or receiving special rates accommodations or other 

privileges or advantages

3 Controlling regulating preventing or destroying competition

4 Pooling or apportioning earnings losses or traffic including s

or dividing forwarding or brokerage fees with another forwarder

5 Alloting ports or restricting or otherwise regulating the numb

character of sailings between ports

6 Limiting or regulating in any way the volume or character of 

or passenger traffic to be carried

7 In any manner providing for an exclusive preferential or coop

working arrangement

b Copies of all such agreements referred to in paragraph a 

section are required to be filed with the Federal Maritime Board 

panied by a letter stating that they are offered for filing in complianc

section 15 of the Shipping Act 1916 specifically requesting the 

approval and addressed as follows

Federal MaritimeBoard

Officeof Regulations

Washington 25 D C

6 
FREIGHT FORWARDER INVESTIGATION ETC 373

c All copies of memoranda or agreements modifications or cancellations

thereof submitted for the Board s approval under section 15 shall clearly

show preferably in the opening paragraph their nature the parties ports

and subject matter in detail and reference to any previously filed agree

ments to which they may relate

d All such agreements or modifications or cancellations thereof shall

not be carried out without the prior express approval of the Board

Sec 244 15 Carrie performing forwarf ing services Any common carrier

by water performing forwarding services shall specify in his tariff the

kinds of forwarding services performed by him and the charges made for

such services

Sec 244 16 Penalties for violations Penalties for violations of this part

are prescribed by section 806 d of the Merchant Marine Act 1936 46

U S C 1228

Sec 244 17 Separability The provisions of this order are not inter

dependent If any portion hereof shall be enj oined set aside suspended or

held invalid the validity and enforceability of all other parts shall be

unaffected thereby and shall to the full extent practicable remain in full

force and effect unless and until it is otherwise provided by a

court of com

petent jurisdiction

Sec 244 18 Effective date The rules in this part shall take effect 120

days after publication in the Federal Register

By order of the Federal Maritime Board

SEAL

Date

USCOMM MA DC

Sgd THOMAS LISI

Secretary

6 F M B
374 FEDERAL MARITIME BOARD

Form FMB 21 Revised

6 29 61

Form Approved

Budget Bureau No 41 R

U S DEPARTMENT OF COMMERCE

Federal Maritime Board

FREIGHT FORWARDER REGISTRATION

INSTRUCTIO

This form is pre

for ocean freig

warder registrat

shall be execute

filed with the O

Regulations 

Maritime Board 

Dept of Com

Washington 25 

pursuant to 

Maritime Board 

eral Order 72 

If additional sp

needed to answe

tions extra shee

be attached t

form

1 Name of registrant if trade name is used by

individual show the words doing business as

or the abbreviation therefor d b a and the

trade name

2 Form of organization corporation partnership

individual etc

3 If answer to 2 is corporation state where

organized

4 Date organization established Month Day

Year

5 If new registrant show date freight forwarding

operations will begin Month Day Year

6 Principal OfficeStreet and number and room number if any 

Box is not regarded as complete address

City or Post Office and State

7 Branch Offices

Name under which operated Business Address Date Eastabli

Month Day 

8 Average number of employees in the principal office and each 

office who handle freight forwarding work and matters incident 

Number of Office Name of Person i

Employees Charge and Home Ad

Principal Office

Branch Office

6 
FREIGHT FORWARDER INVESTIGATION ETC 375

9 Other Registered Forwarders with whom registrant does business

Name Address Reg No

10 Names addresses and citizenship of principal stockholders owners and

officers and extent of stock ownership or other interest of each

Name Title Home Address Citizenship Extent of Stock

Name of Ownership or

Country Other Interest

11 Total Stock Authorized Total Stock Issued

12 a Is registrant a parent corporation subsidiary or affiliate of any

other business 0Yes 0 No

b Is registrant connected with any other business through common

ownership of stock or other interest employment or otherwise

0 Yes 0 No

If answer to a and or b is Yes state name address and

description thereof

Name Address Description

a

b

13 a Does registrant or any officer stockholder or employee of the

registrant control or engage directly o rindirectly in any business

other than forwarding 0Yes 0 No

b If answer is Yes 1 describe nature of such business and 2

affirm that the provisions of General Order 72 revised have been

read and understood and that registrant will comply therewith

making specific reference to Rule 244 13 setting forth certain

requirements for and certain restrictions against the collection of

oceanfreight brokerage

14 Does registrant specialize in handling particular commodities or in par

ticular trades 0 Yes 0 No If Yes give details

Date Signature of Official

Title

6 F X B
376 FEDERAL MARITIME BOARD

The above statements are made subject to penalties prescribed by s

for any person who knowingly and willingly makes a false stateme

any matter within the jurisdiction of an agency of the United State

U S C 1001

Note

UBranch office means an office where the registrant maintains o

more full time salaried employees engaged in the business of furn

forwarding services

uPrincipal office means the office designated by the registrant 

principal office engaged in the business of furnishing forwarding se

and at which the registrant maintains one or more full time salarie

ployees or engages in such business as full time owner or partner 

registrant may designate only one office as principal office

6 F 
FREIGHT FORWARDER INVESTIGATION ETC 377

ORDER

At a Session of the FEDERAL MARITIME BOARD Held at its

office in Washington D C on the 29th day of June 1961

No 765

INVESTIGATION OF PRACTICES OPERATIONS ACTIONS AND AGREE

MENTS OF OCEAN FREIGHT FORWARDERS AND RELATED MATTERS

AND PROPOSED REVISION OF GENERAL ORDER 72 46 CFR 244

No 831

INVESTIGATION OF PRACTICES AND AGREEMENTS OF COMMON CAR

RIERS BY WATER IN CONNECTION WITH PAYMENT OF BROKERAGE OR

OTHER FEES TO OCEAN FREIGHT FORWARDERS AND

FREIGHT BROKERS

These proceedings having been instituted by the Board upon its

own motion and having been duly heard and submitted and in

vestigation of the matters and things involved having been had

and the Board on the date hereof having made and entered of

record a report containing its conclusions and decision thereon

which report is hereby referred to and made a part hereof

It is ordered That these proceedings be and they are hereby

discontinued

By the Board

Sgd THOMAS LISI

Secretary

6 F MB
FEDERAL MARITIME BOARD

No 857 SUB No 5

ApPLICATION OF STATES MARINE LINES INC FOR PERMISS

UNDER SECTION 805 a MERCHANT MARINE ACT 193

Decided June 9 1961

States Marine Lines Inc granted written permission under section 80

of the Merchant Marine Act 1936 as amended A permitting 

uance in the event an operating differential subsidy is awarded 

Marine Lines Inc of the operation of the 55 laskan a tanker 

by Oil Transport Incorporated an affiliate of States Marine Lines 

in the transportation of chemicals petro chmicals and lubricating 

domestic commerce between U S Pacific ports on the one hand and 

Gulf and Atlantic ports on the other and B permitting the A

to be chartered or sub chartered for the carriage of petroleum or 

leum products in the domestic intercoastal and coastwide commerce 

United States since granting of the permission found 1 not to 

in unfair competition to any person firm or corporation operati

clusively in the coastwise or intercoastal service and 2 not 

prejudicial to the objects and policy of the Merchant Marine Act 

as amended

Elkan Turk George F Galland and Robert N Kharasc

applicant States Marine Lines Inc

Mark P Schiefer for intervenors Marine Navigation Com

Inc and Marine Transport Lines Inc

Robert Blackwell and Donald Brunner Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Chairnt an SIGFRID B UNANDER Vice

Cnairman RALPH E WILSON Member

By THE BOARD

I PROCEEDINGS

By an application dated July 18 1960 States Marine Lines 

States Marine requested a permission under Sec 805 

the Merchant Marine Act 1936 as amended Act for cont

37

6 FMB
STATES MARINE LINES INC SEC 805 a APPLICATION 379

operation of the SS Alaskan by Oil Transport Inc after the

award of an operating differential subsidy to States Marine b

the issuance of a notice with respect to this application to limit

the time within which intervention may be filed and c the

issuance of a notice of hearing to the effect that an initial decision

will be issued

Marine Navigation Co Inc Marine Navigation and Marine

Transport Lines Inc 1larine Transport requested and were

granted perndssion to intervene

Hearings wereheld in January 1961 followed without the filing

of briefs by an initial decision of an Examiner served April 13

1961

The initi l decision favoreq written permission under Sec 805

a of the Act permitting continuance of the operation of the

SS Alaskan in the event an operating differential subsidy contract

is awarded States Ivlarine and permitting the SS Alaskan to be

chartered or sub chartered in such event Exceptions and replies

were filed The Board heard oral argument on June 21 1961 The

Examiner s decision is affirmed

II FACTS

An application by States Marine for an operating differential

subsidy under Title VI of the Act is pending before the Board

Hearings on such application involving issues under Secs 605 a

804 and 805 a of the Act have been held and concluded in

Docket 857 and subsidiary proceedings upon which the Board

has issued its reports

Oil Transport Inc Oil Transport now proposes to operate the

SS Alaskan as a contract carrier of chemicals petrochemicals and

lubricating oil in domestic commerce between U S Pacific ports

and U S Gulf and Atlantic ports The SS Alaskan is an American

flag T 2 tanker Oil Transport is a corporation the stock of

which is owned 50 by Global Bulk Transport Corp and 5000 by

Joshua Hendy Corp The owners of the majority of the stock of

Global Bulk Transport Corp also own amajority of the stock of

States Marine Oil Transport is considered to be an affiliate or

associate of States Marine the subsidy applicant

Of 15 U S flag ships owned by Marine Transport only 2 are

confined to domestic service These 2 ships are not in competition

with the SS Alaskan Of 7 ships chartered only 4 are under U S

flag and none of the 4 is confined to domestic service and of 48

6 F MB
380 FEDERAL MARITIME BOARD

ships managed for owners or charterers only 12 are unde

flag and only 1 ofthe 12 is confined to domestic service Th

ship is not one of the 3 chemical carriers involved here 

ships are not engaged exclusively in domestic trades and are 

ileged under their charters to engage in world wide servic

actually operate in world wide service The decision to enga

domestic or international trade apparently rests with Dow 

with the intervenor Three Marine Transport ships carry 

icals but the Alaskan as a conventional tanker cannot car

specialized chemicals which these ships the Marine Chemis

Marine Dow and the Leland IDoan can carry Each ship is o

by aseparate corporation and bareboat chartered to Marine T

port Marine Transport chartered the ships to Dow Che

Corporation and operates the ships as agent for Dow Che

Corp Dow uses them for its own purposes and makes 

available as aproprietary carrier when its cargoes are not e

to use the ships fully None of these ships has been engage

clusively in coastwise or intercoastal trade over the two 

covered by an exhibit showing their operations There is n

clusive evidence in this proceeding that they will so operate 

future

The three tankers which carry chemicals because of spe

lined tanks are capable of carrying chemicals which the ord

T 2 tankers such as theAlaskan could not possibly carry

The Alaskan was taken out of lay up employs American 

men and carries products which are important to the econo

the country

III DISCUSSION

The jurisdiction of the Board is not challenged

The application is for written permission pursuant to Se

a of the Act This section provides that it shall be unlaw

pay any subsidy to States Marine if States Marine or any ho

company subsidiary affiliate or associate or any officer dir

agent or executive thereof directly or indirectly shall ow

operate any vessel engaged in the domestic intercoastal or 

wise service or own any pecuniary interest directly or indir

in any person or concern that owns or operates any vessel 

domestic intercoastal or coastwise service without the written 

mission of the Board This provision makes it unlawful to a

orpay any subsidy to States Marine ifits associate Oil Trans

Inc operates the SS Alaskan in the domestic intercoastal or 

6 F 
STATES MARINE LINES INC SEC 805 a APPl JICATION 381

wise service unless we give permission Our findings must be re

lated to 1 whether the intervenors have shown that any person

firm or corporation operates exclusively in the coastwise or inter

coastal service and if so 2 whether the granting of the applica

tion a will result in unfair competition with such operator or

b would be prejudicial to the objects and policy ofthe Act The

Examiner found that none ofthese circumstances existed and that

the application for permission should be granted

Marine Transport and Marine Navigation made the following

exceptions to the initial decision

1 The Examiner erroneously failed to dismiss the application

because all the testimony in its support was hearsay did not con

stitute reliable probative and substantial evidence as required

by the Administrative Procedure Act and deprived intervenors

of the right of effective cross examination and hence a fair hear

ing

2 The Examiner erroneously failed to dismiss the application

on the ground that even if the hearsay is accepted as substantial

evidence applicant has failed to prove its case as the record s

bare of evidence of the essential relation for which permission is

required

3 The Examiner erroneously failed to find the application

should be dismissed for lack of evidence as to the scope and com

petitive effect ofthe proposed domestic service and the lack of any

showing of aneed or desire for the service by the shipping public

4 The Examiner erroneously failed to deny the permission

sought on the ground that it would result in overtonnaging the

chemical trade causing the foreign transfer of an especially built

U S flag vessel and therefore prejudicial to the objects and policy

of the Act

5 The Examiner erroneously failed to find that intervenor has

pioneered and developed the coastwise and intercoastal chemical

trades with both newly constructed vessels and specially converted

vessels operating under U S registry and therefore should be

protected against the predatory operations for which applicant

seeks permission

6 The Examiner erroneously failed to find that in the absence

of evidence as to Sttaes Marine s intentions in the event the per

missio so ght should be denied it was impossible to nake the

determInatIon that the proposed operation would not be prejudicial

to the objects and policy of the Act

6 F MB
382 FEDERAL MARITIME BOARD

7 Joshua Hendy the 50 owner of Oil Transport is a 

ner of States Marine and should have been held to be its 

ciate within the meaning of Section 805 a

8 The initial decision shows that the Examiner erro aeous1y

failed to place the burden ofproof where it belongs namely o

applicant States Marine

9 The Examiner s conclusion that the competitive effect o

proposed operation would be no different if Joshua Hendy 

either to buy the Alaskan or charter another T 2 tanker 

States Marine obtained a subsidy was unsupported by the r

and erroneous

10 The Examiner erroneously found that lYlarine Transp

not operating exclusively in the domestic trades

The first second third and eighth exceptions relate to the 

hearsay in the proceedings and to the burden of proof 

standards for denial of permission under Sec 805 a of th

are unfair competition or prejudice to the objects and policy 

Act Applicants sustained their part of the burden of pro

showing that neither the applicant States Marine nor any af

or subsidiary solicits cargo for the SS Alaskan nor takes any 

the SS Alaskan that no subsidy can be diverted and that n

vantage or preference could accrue to the applicant or to its 

ciate Thereafter the burden of proving unfairness and prej

rested on the intervenor who asserts the unfairness and preju

Grace Line Inc Subsidy Route 4 3 FMB 731 737 1952 

evidence on this issue undue advantage or undue preju

should come from parties claiming prejudice under this sec

Sec 605 c American Export Lines Inc IncreasedSa

Route 10 4FMB 568 572 1955 States Steamship Co Su

Pacific Coast Far East 5 FMB 304 309 1957 In its ea

decision on the point the Board applied this rule as to pro

unfair competition under Sec 805 a BaUo Mail Steamsh

Use of Vessels 3 USMC 294 297 1938 The same burde

imposed on an intervenor in claiming protection of the pur

and policy clause of Sec 805 a T J McCarthy Steamsh

Sec 805 a Application 5 FMB 666 670 1959 The Bo

only decision placing the burden of proof under Sec 805 

the applicant Pacific Far East Line Inc Sec 805 a Ca

Hawaii 5 FMB MA 287 297 1957 was reversed in Pacifi

East Line v Federal Maritime Board 275 F 2d 184 D C 

1960

6 F 
STATES MARINE LINES INC SEC 805 a APPLICATION 383

Intervenors need was facts proving something on their side

The alleged hearsay evidence did not preclude intervenors from

bringing in their own evidence of the circumstances which were

the subject oftestimony The Examiner evaluated what testimony

there was and used what was relevant and material The excep

tions are not sustained

The last paragraph of the third exception the fourth exception

and the sixth exception all relate to the objects and policy of the

Act The following considerations are advan ced as affecting this

issue

1 the shipping public s need for the service is the fundamen

tal consideration in evaluating the objects and policy of the Act

2 overtonnaging of the chemical trade would be prejudicial

to the objects and policy ofthe Act and

3 ifStates Marine would be willing to terminate its affiliation

with the operation of the SS Alaskan and still accept subsidy the

objects and policy of the Act require that permission be withheld

The intervenors contend that the shipping public s need is being

met by the intervenors who are virtually exclusive suppliers of

this service and that overtonnaging will destroy the value of their

exclusive service Service and need however are not relevant

here in accordance with the decision of the Court of Appeals in

Pacific Far East Lines v Federal Maritime Board 275 F 2d 184

at 186 1960 Service and need would be important if the Board

were a pubdc utility commission passing upon an application to

enter a

regulated field but have nothing to do with the question

whether PFEL s competition with Matson would be unfair

The issue of exclusive supply of the services and ofthe inevitable

overtones ofmonopoly were dealt with in the PFEL case as follows

275 F 2d 1867

The Board has disclosed no basis for its finding the PFEJ s entry into the

trade would be prejudicial to the objects and policy of the Act Preservation

of Matson s monopoly is not an object or policy of the Act On the contrary

the public interest in ending this monopoly should be considered The Act

does not exempt the California Hawaii trade from the anti monopoly policy

which Congress has often expressed

Intervenors also claim they will create a situation adverse to the

objects and policies of the Act by transferring a ship to foreign

registry ifthere is overtonnaging

The objects and policy of the Act do not call for the termination

of the applicant s affiliation with the operators of the SS Alaskan

if subsidy is accepted so that the intervenors can operate a shipninstead

6

F M B
384 FEDERAL MARITIME BOARD

This ground for passing on an application was dealt w

T J McCarthy Steamship CoSec 805 a Application s

at 672 as follows

Nor can we find that the granting of the pennission would be prej

to the objects and policy of the Act The denial of the application o

ground would as the examiner found result merely in the deactivat

McCarthy s three automobile carriers and the reactivation of Nich

three carriers This would not constitute a furtherance of the policy 

Act and would result in a denial to the principal shipper of his cho

carriers We therefore find that permission to engage in the auto

carrying business from Detroit to Buffalo and to Cleveland in the 

subsidy is awarded would not be prejudicial to the objects and policy 

Act Section 805 a permission for this service will be granted as a 

rate and distinct service from the proposed subsidized service

The fifth ninth and tenth exceptions are addressed to the 

of unfair competition and to the exclusively domestic charac

the competition These are general complaints about preda

operations but without any substantiating facts Without 

facts in the record it is impossible to pass on the validity o

complaints in the exception In support of the contention o

fair competition intervenor s witness testified that M

Transport has been primarily engaged in the domestic tra

The evidence is to the effect that intervenor is not primari

gaged in the domestic trades

The facts showing that intervenors ships were not in dom

intercoastal or coastwis service and that their charters perm

international operations are not responsive to the statutor

quirement that the objector is operating exclusively in coas

or intercoastal trade There was also ample testimony in ad

that differences in ships characteristics the types of pro

carried and work performed by allegedly competing ships 

such that the competition would not be substantial much les

fair These exceptions are rejected

The seventh exception is an argument that Joshua Hendy s

be found to be an associate of States Marine The grant o

mission to the applicant States Marine would be proper i

applicant owned the SS Alaskan and operated it in the ma

shown on this record The intervenors would not be entitl

protection against the activities of the SS Alaskan no matte

owned it nor of Joshua Hendy s status since they have no 

to exclusive service in the domestic bulk trade and they are 

entitled to displace acompetitor s ship See Pacific Far East 

Inc Sec 805 a Calls at Hawaii supra and T J McC

Steamship Co Sec 805 a Application supra

6 F M
STATES MARINE LINES INC SEC 805 a APPLICATION 385 

This report shall serve as written permission under Sec 805 a

of the Merchant Marine Act 1936 as amended for continued op

eration of the SS Alaskan by Oil Transport Inc after the award

of an operating differential subsidy to States Marine Lines Inc

6 F MB
FEDERAL MARITIME BOARD

No S 114

IN RE GULF SOUTH AMERICAN STEAMSHIP CO IN

Decided June 9 1961

Operation of northbound Chinese flag ships by CSAV on Trade Rou

31 found not to constitute liner orberth service and should not be 

effect in determining substantiality and extent of foreign flag co

tion for purpose of determining operating differential subsidy rate

OdeU Kominers and J Alton Boyer for Gulf South A

can Steamship Co Inc

John R Tankard Louis Zimmet M W Belcher Jr and 

jamin R Wolman as Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER

Vice Chairman

BY THE BOARD

The Board by an Order dated July 11 1960 ordered a he

pursuant to the request of Gulf South American Steamshi

Inc G SA for a review and readjustment of certain o

ing differential subsidy rates in accordance with the prov

of Section 606 1 of the Merchant Marine Act 1936 as am

the Act It was the contention of G SA that certai

erating differential subsidy rates for the items of Mainten

and Repair and Hull and Machinery Insurance for the Cal

year 1959 were not correctly determined by the Board in tha

rates did not include the costs of operation of the Chines

ships of the Chilean Line Compania Sud America Vap

CSAV which G SA contends was during the calenda

1958 a substantial competitor engaged in a liner operatio

886

6 F 
IN RE GULF SOUTH AMERICAN S S CO INC 387

the Essential Trade Route No 31 United States Gulf Coast West

Coast South America

A hearing was held before an examiner who in a recommended

decision found uG SA has the right to have considered the

costs of CSAV s Chinese flag vessels and their cargo carryings

northbound as well as southbound in 1958 in this trade as factors

in the calculation of its operating differential subsidy rates for

1959

Exceptions to the recommended decision were filed followed

by oral argument

FACTS

Briefly stated the facts are G SA is a subsidized Ameri

can flag operator on Essential Trade Route No 31 United States

Gulf Coast West Coast South America under Operating Differ

ential Subsidy Agreement No FMB 75 The issue in the matter

at hand is whether the subsidy rates for 1959 operations of the

operator s ships on this trade route have been correctly calcula

ted in terms of existing Maritime manuals and procedures Spe

cifically the question is whether there was justification for the

exclusion from the determination of foreign flag competition of

the northbound carryings of the Chinese flag ships of CSAV It

is the contention of the G SA that such operations should have

been included and that thereby the Chinese flag operations would

have been in excess of 15 participation in the trade thereby

requiring inclusion of their operating costs in the determination

of the rates to be applied to the G SA results for 1959 It is

the contention of counsel for Maritime that the CSAV Chinese

flag operations were not uI ner or regular northbound and that

therefore they were properly excluded

Section 603 b of the Act provides for the payment of an oper

ating differential subsidy for the jtems of wages subsistence

insurance maintenance and any other item at which the oper

ator is at a substantial disadvantage in competing with vessels

of a foreign country whose U

vessels are substantial compet

itors of the vessel or vessels covered by the contract It is ap

parent from the statements ofthe Examiner in the recommended

decision and G SA through the record and arguments

presented before this Board that they misconstrue the issue in

this proceeding as being whether the CSAV Chinese flag ships

are usubstantiaI competitors This presumption is not correct

The sole issue presented before this Board is whether the Chinese

8 F M B
388 FEDERAL MARITIME BOARD

flag ships are engaged in a Hliner operation and thereby t

counted northbound in the determination of the substant

and extent of foreign flag competition on Trade Route No 3

The error of those contending that the issue is other tha

herein before set forth apparently stems from their failur

recognize that the Board has already for the purposes of proc

ings such as this resolved the basic isue of what shall const

Usubstantial competition by the promulgation and adoptio

the uManual of General Procedures for Determining Substa

ity and Extent of Foreign Flag Competition and the applica

of the Manual of Essential United States Foreign Trade Ro

Specifically the Board has used its specific powers as set f

in Section 204 of the Act to establish criteria for the determ

tion of what shall constitute usubstantial competition and 

published these criteria in the aforementioned Manual of Ge

Procedures and applied said procedures in each subsidy rate 

termination presented for adoption

The Board in Docket S 29 4 FMB 40 recognized that the 

guage of Section 603 b was not in and of itself sufficient to 

termine specific rates and that to do so required clarifica

and amplification of the term usubstantial competitor Thu

Docket S 29 the Board said at page 44 that UCongress has 

provided a definition of the term lsubstantial competition 

applies to foreign flag operators Inthe exercise of its statu

authority Section 204 and to clarify the indefinite term 

stantial competition the Board adopted the Manual of Ge

Procedures wherein it is spelled out that there shall be cou

u

carryings by ships of all foreign flags engaged in liner 

ation emphasis added Any argument that this is not 

ciently clear to establish operating criteria is answered b

ferral to that portion of the Manual of Essential Trade Rout

formally adopted and published document which defines b

or liner service as follows

Liner berth 01

regular 8ervice

These terms often used interchangeably have reference

to a service operating on a definite advertised schedule

giving relatively frequent sailings at regular intervals be

tween specific United States ports or range and designated

foreign ports orrange Emphasis supplied

It is therefore the opinion of the Board that to the extent 

Section 603 b requires clarification such has been accompl

by the Board through the adoption publication and applic

6 F 
IN RE GULF 80UTH AMERICAN 8 8 CO INC 389

of the aforementioned Manuals While it has been argued that

the criteria set forth in Exhibit 7 have not been formally adopted

the Board does not have to pass upon the correctness of such a

statement since there are embodied in Board s manuals suf

ficiently clear criteria to resolve the issue in this proceeding

Any contention therefore that the Board has been arbitrary or

otherwise acted without authority in its application of criteria for

the determination of what constitutes substantial competition

is wholly without merit and clearly erroneous in light of the exist

ence of the aforementioned manuals and the past practice of the

Board in acting upon final subsidy rate recommendations for

each subsidized operator

In an application of the criteria contained in the Manual ofGen

eral Procedures and the Manual of Essential Trade Routes to

the facts in this case it is the opinion of this Board that CSAV

has not so operated its northbound ships as to constitute a liner

service Specifically nothing has been presented which supports

a contention that the Chineseflag ships in 1958 were oper

ating on a definite advertised schedule in such manner as

to afford a northbound shipper of general cargo any indication

that the Chinese flag ships were desirous of carrying or in a posi

tion to carry general cargoes on a definite basis

Specifically nothing which these ships do or the manner in

which they are operated would lend support to a conclusion that

they seek general cargo either by their nature of operation or by

their means of solicitation Reduced to basics the question to be

asked is whether a shipper northbound could know with certainty

that a CSAV ship under the Chineseflag would one two or six

months hence be able to carry his cargo from one point to another

on the general trade route The facts in this proceeding lead to

the conclusion that such a shipper could not so rely upon the oper

ations space availability or ports of discharge as to make plans

for deliveries in the future

It is here important to compare the operations of the G SA

ships and the CSAV Chinese flag ships G SA operates a fleet

of C 2 type ships having adeadweight capacity ofbetween 10 000

and 10 600 tons CSAV ships are C1 MAV I

type ships with a

deadweight capacity of approximately 5 800 tons In 1958 G SA

had thirty three 33 northbound sailings with a capacity of ap

proximately 330 000 tons Its ships carried only a total of 129 429

tons being composed of 39 429 tons of general representing

3041 of total carried and 90 000 of bulk Utilization on an

Q F lla B
390 FEDERAL MARITIME BOARD

average basis and with little variation for each individual sai

was somewhat less than 50 Chinese ships of CSAV on 

other hand had nine 9 sailings northbound with a capacit

approximately 52 000 tons Its ships carried a total of app

imately 50 263 tons being composed of 811 tons of general re

senting 3 of total and 49 452 tons of bulk Utilization o

average basis and with little variation for each individual sa

was approximately 96

The bulk cargoes carried by CSAV Chinese flag ships were 

marily carried under contracts of affreightment which we re 

such duration that CSAV knew well in advance that each no

bound sailing would have bulk utilization of the ship of app

mately 96 of total available Such cargo as may have been 

ried was in such small amounts as to appear to be on the bas

last minute convenience rather than active solicitation It 

not appear that the materials submitted by G SA in suppo

its contention that CSAV did advertise justify such a conclu

in light ofall ofthe facts

The contracts of affreightment referred to hereinabove are 

nificant in an evaluation of whether the CSAV operation w

liner operation A comparison of the respective contracts o

freightment Ex No 3 Attachments 3 and 4 of CSAV and 

SA shows that in the latter there are specific reservations o

right to forego such bulk cargo as may have been available in 

event the berth nature of the service was threatened CS

contract on the other hand contains no such provision and p

the greater emphasis upon the carriage of the bulk cargoes 

ered by the affreightments

The applicant herein seeks to inject statements of the Boa

its decisions in Dockets Nos S 57 5 FMB 537 and S 73 5 F

771 to the effect that the carriage of only four tons of ge

cargo constitutes that sailing as Hliner Applicant miscons

the prior statements as applying to the matter here under co

eration Such use as may have been made of a so called Hfour 

concept was solely for the purpose of determining whethe

general cargo placed on top of military was sufficient to ju

the conclusion that such a sailing was apart of an existing ser

It was not directed to the question of whether such opera

were competitive Since the sole issue here is whether the 

petitive operations of CSAV were of a liner nature there ca

no reliance upon prior statemen as to the significance of a g

ship carrYing as little as four tons of general cargo Itcould 

6 F 
IN RE GULF SOUTH AMERICAN S S CO INC 391

be seriously contended that ships each carrying as little as four

tons in a service which generated for another carrier in excess of

39 000 tns of general cargo in one year was a substantial com

petitor Nor would the fact that such ship carried as little as four

tons possibly represent a substitute for the requirement specified

in the Manual and of the long established criterion of the Board

that there be advertisement considerably before sailing Thus

while the Board here reaffirms its reliance upon the criteria

hereinabove stated as the determinant of whether an operation

was Hliner the Board need only look to the type of service rend

ered by CSAV to see that it did not solicit general cargo and was

not in a position to carry significant amounts of such cargo even

ifit was offered

That G SA would have liked to carry the bulk carried by

CSAV and would have been in a position to do so does not over

ride the fact that to be counted in the determination of the extent

of substantial foreign flag competition an operation must be

within the standards heretofore established by the Board and con

sistently followed in the determination of the subsidy rates for

the five subsidized items for each subsidized operator on an an

nual basis

CONCLUSION

The Board therefore finds that the CSAV northbound oper

ation with Chinese flag ships on Trade Route No 31 was not

Hliner and that such operations should not be counted in deter

mining the substantiality and extent of foreign flag competition

for determining applicable rates for G SA Requested findings

not made have been considered and found immaterial or not sup

ported by the evidence An Order of dismissal will be entered

BOARD MEMBER WILSON dissenting

I firid it necessary to dissent from this decision of the Board

which reverses the recommended decision of the Examiner based

on the premise

That the operation of the Chinese flag ships by CSA V in

northbound service did not represent substantial competi

tion to G SA because this northbound service did not

constitute berth liner service in accordance with criteria

established by the staff

This report defends the Board s previous action in establishing

irl the Manual of General Procedure for Determining Substantial

8 F IIB
392 FEDERAL MARITIME BOARD

ity and Extent of Foreign Flag Competition March 

the Techniques Used in Determining Extent of Foreign 

Competition I concur in the necessity for the Board to e

lish certain criteria as a guide in implementing the provisio

Section 603 b of the Merchant Marine Act 1936 However 

established criteria should not be used to prejudice the Bo

evaluation of the data reported or the application of legal s

ards to the facts ofany individual calculation Section 603 b 

not restrict substantial competitors only to those ships u

foreign registry which are engaged in berth liner service 

restriction is added only by strict adherence to the Manua

result is a variation in the terms of the statute as mentione

the Examiner

The record shows that both G SA and CSAV handled s

quantities of bulk cargo on their northbound sailings The

in direct competition for this cargo In the case of iron ore 

the principal shipper G SA in 1958 suffered a sharp decl

the amount carried while CSAV substantially increased its 

riage The comparative figures for 1958 are 21 763 tons fo

SA and 44 834 tons for CSAV This can scarcely be said n

represent substantial competition They are also competitiv

other oresand nitrates

In the general cargo area there is one significant diffe

between the two lines taken note of by the Examiner but n

ferred to in the Report G SA serves Colombia from w

country originates about 98 percent of the coffee exported 

the South American west coast CSAV does not serve Colo

The two lines are competitive for all other types of general c

The coffee shipments handled by G SA are sizable and r

sent a large portion of the total general cargo tonnage for 

line A direct comp rison of the percentage of general 

carried by the two lines in competition is therefore misle

unless adjustment is made for the non competitive 

tonnage

Even if the premise that substantial foreign competition 

be legally restricted to berth liner operation were accepted w

the facts otherwise show its existence under one foreign fla

exclusion of the Chinese flag CSAV ships cannot in my op

be justified

The criteria used by the staff in determining what const

berth liner service have never been approved by the Board 

6 F 
IN RE GULF SOUTH AMERICAN S S CO INC 393

therefore cannot be regarded as having legal standing in terms of

the authorization contained in Section 204 ofthe Act

The Report concedes that all of the staff criteria for determin

ing what constitutes berth liner service were met by CSAVs

Chineseflag ships with the exception based primarily on the

method of advertising that they do not seek or solicit general

cargo

The Record shows that both lines advertise in the same media

in accordance with South American practice the only significant

difference being in the amount of advance notice given to ship

pers The minimum advance notice given by the CSAV was 5

days Conceding this to be relatively short it still allows suffi

cient time for available cargo to be booked The Record also

shows that general cargo was booked and carried in most of the

Chinese flag sailings in quantities far in excess of the minimum

previously used by the staff in other cases for determining

whether or not a particular sailing qualified for liner service

The Record shows that the position first taken by the staff to

disqualify th northbound Chinese flag sailings from berth liner

service was based on data taken from statements contained on

Forms 7801 submitted by CSAV That this data was meager and

could be supplied by people with widely varying degrees of re

sponsibility was not denied As the matter progressed other

reasons were injected by the staff to support their original con

tention Great reliance was later placed on the lack of proper

advertising although the staff admitted that at the time the orig

inal position was taken no information was available or sought in

regard to CSAV s advertising

I cite the methods used by the staff in this case because they

represent an arbitrary and bureaucratic approach to a prob

lem which should not be condoned I deplore the fact that the

Board has not seen fit to take cognizance of it

To the extent that itis held that the Board by strict adherence

to an administrative manual may limit the character of the com

petition it will recognize and may exclude consideration of other

competition the Board has exceeded its authority The use of

manual provisions showing techniques used in determining the

extent of foreign flag competition to determine rights of carriers

under the statute is improper even though the manual provisions

may have been uncontested for many years It is never too late

to correct errors ofthis type

8 F M B
394 FEDERAL MARITIME BOARD

The Board should determine rights by the law not by s

adherence to guiding manual provisions on unapproved 

criteria The law states simply that the amount of the opera

differential subsidy shall not exceed the excess of certain c

and items of expense which the Board finds that the appli

is at a substantial disadvantage in competition with vessels 

a foreign country over the estimated fair and reasonable co

the same items if the vessel were operated under the reg

of a foreign country whose vessels are substantial competitor

the vessel or vessels covered by an operating differential 

sidy contract Substantial disadvantage in competition has 

shown and the applicant is entitled to the cost difference

6 F 
IN RE GULF SOUTH AMERICAN S S CO INC 395

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 29th day of June 1961

No S 114

GULF SOUTH AMERICAN STEAMSHIP Co INC

The Board on the date hereof having made and entered of

record its report in this proceeding which report is hereby re

ferred to and made apart hereof

It is Ordered That the proceeding be and it is hereby

dismissed

By the Board

Sgd THOMAS LISI

Secretary

6 F M B
FEDERAL MARITIME BOARD

No 877

FILING OF FREIGHT RATES IN THE FOREIGN

COMMERCE OF THE U S

No 878

PUBLIC DISTRIBUTION OF FREIGHT TARIFFS

Decided June f9 1961

Elmer C Maddy for River Plate and Brazil Conferences 

Plate United States Canada Freight Conference North B

United States Canada Freight Conference Mid BrazilU

States Canada Freight Conference River Plate and Brazil U

States Reefer Conference Brazil United States Canada Fr

Conference

John R Mahoney for Havana Steamship Conference H

Northbound Rate Agreement Santiago De Cuba Conference 

Coast Colombia Conference Leeward Wind Ward Islan

Guianas Conference United States Atlantic Gulf Haiti C

ence United States Atlantic Gulf Bermuda Fr ight Confe

Atlantic Gulf Panama Canal Zone Colon Panama 

Conference Atlantic Gulf West Coast of Central Amer

Mexico Conference Atlantic Gulf West Coast of South A

ica Conference West Coast South America Northbound C

ence U S Atlantic Gulf Venezuela and Netherlands An

Conference U S Atlantic Gulf Ports Jamaica B W I 

Conference

Burton H White for Continental North Atlantic West

Freight Conference Marseilles North Atlantic U S A F

Conference The West Coast of Italy Sicilian and Adriatic P

North Atlantic Range Conference WIN A C North At

396

6 
FILING OF FREIGHT RATES IN U S FOREIGN COMMERCE SS7

Westbound Freight Association North Atlantic Baltic Freight

Conference North Atlantic Continental Freight Conference North

Atlantic French Atlantic Freight Conference North Atlantic Med

iterranean Freight Conference Atlantic and Gulf Red Sea and

Gulf of Aden Freight Conference North AtlanticUnited Kingdom

Freight Conference American Great Lakes Mediterranean East

bound Freight Conference

Leonard G James for CAMEXCO Freight Conference Canal

Central America Northbound Conference Capca Freight Confer

ence Caribbean Pacific Northbound Freight Conference Col

pac Freight Conference Japan Puerto Rico Virgin Islands

Freight Conference Outward Continental North Pacific Freight

Conference Pacific Coast Caribbean Sea Ports Conference

Pacific Coast European Conference Pacific Coast Mexico

Freight Conference Pacific Coast Panama Canal Freight Con

ference Pacific Coast River Plate Br zil Conference Pacific

Indonesian Conference Pacific Straits Conference PacificjWest

Coast of South America Conference Trans Pacific Freight Con

ference of Japan United KingdomUnited States Pacific Freight

Association West Coast South America North Pacific Coast Con

ference

William R Daly for Harbor Commission City of San Diego

California

Elkan Turk Jr for Far East Conference StraitsjNew York

Conference Associated Steamship Lines New York Freight

Bureau Hong Kong Siam New York Conference Japan At

lantic and Gulf Freight Conference

Robert N Burchmore for National Industrial Traffic League

Gordon L Poole and William H King for Pacific Westbound

Conference

Charles R Seal for North Atlantic Ports Conference

Robert Kharasch for French North Atlantic Westbound

Freight Conference

Walter J Myskowski for The Port of New York Authority

Thomas K Roche for United States Great Lakes Bor

deaux Hamburg Range Eastbound Conference United States

Great Lakes Bordeaux Hamburg Range Westbound Conference

United States Great Lakes Scandinavian Baltic Eastbound

Conference Scandinavian Baltic Great Lakes Westbound Con

ference Great Lakes United Kingdom Eastbound Conference

Great Lakes United Kingdom Westbound Conference

S F MB
398 FEDERAL MARITIME BOARD

Frank J Mahoney for Automobile Manufacturers Associ

Inc

REPORT OF THE BOARD

THOS E STAKEM Chairman and RALPH E WILSON

Member

BY THE BOARD

In response to a HN otice of Proposed Rule Making pub

in the Federal Register on January 5 1960 25 FR 60 the 

eral Maritime Board has received and reviewed the public s 

ments on proposed rules requiring every common carrie

water in the foreign commerce 1 to file schedules 

ing rates and charges and related regulations for transpo

property except full shiploads of bulk cargo and 2 to e

lish a system for the distribution of schedules on rates 

charges and rules and regulations for the transportation of 

erty in the foreign trade

After reviewing the written comments the Board listen

oral arguments on August 23 1960 relative to the regulations 

posed in Docket No 877 and on August 24 1960 relative t

regulations proposed in Docket No 878

The comments and arguments challenge the Board s stat

authority to adopt the proposed regulations and point out c

burdens and hardships that will occur in the administration o

regulations if adopted Changes weresuggested

The regulations are fully authorized by Sec 204 of the 

chant Marine Act 1936 1936 Act and Sec 21 of the Shi

Act 1916 Act Sec 204 b of the 1936 Act authorize

Board to adopt Hall necessary rules and regulations to carr

the powers duties and functions vested in it by this Act P

ant to Sec 204 of the Merchant Marine Act 1936 the funct

powers and duties vested by the 1936 Act were transferred t

U S Maritime Commission Section 105 5 of Reorganiz

Plan 21 of 1950 transferred to the Federal Maritime Boa

much of the functions with respect to adopting rules and re

tions as relate to the functions of the Board under the prov

of the reorganization plan

It is considered that the foregoing authorizations and as

ment of functions give the Board power to adopt regulation

6 F 
FILING OF FREIGHT R TES IN U S FOREIGN COMMERCE 399

the administration of Sec 21 of theAct and to aid in the enforce

ment ofSees 16 17 and 21 ofthe Act

By Sec 21 of the Act the Board may require any common car

rier by water or any agent or employee to file with it any report

or any account record rate or charge appertaining to the busi

ness of such carrier and to furnish such documents in the form

and within the time prescribed by the Board The reporting re

quirement as to the filing of rate schedules for transporting

property in foreign commerce is sustained under Sec 21 A fil

ing with respect to rate increases at least 30 days before the

effective date thereof is needed to enforce better the prohibitions

in Sec 16 against giving undue or unreasonable preferences or

advantage and to prevent evasions of the prohibition against pro

viding transportation at less than regularly established and en

forced rates Under the existing regulation which requires filing

within 30 days after a change in rates shippers could be charged

varying rates which would not appear in areported tariff as long

as the rate was reported later because the regular rate or charge

established and enforced by a carrier would always be the rate

actually charged to a shipper instead of the one in the printed

tariff The tariffs reported to the Board only reflected past

charges the advance reporting of charges will protect shippers

against being charged a rate that does not appear in a

reported

tariff and the regular rates referred to in Sec 16 of the Act are

now made the reported rates

Sec 17 of the Act refers to the demand of unjustly discrim

inatory rates A rate or charge may be demanded under Sec 17

not only by means of the printed tariff which a carrier maintains

but also verbally or by letter if the tariff may be changed subject

only to subsequent reporting If the tariff rates are reported be

fore a demand however the Board is in a position to discover

possible discriminatory rates and to require correction as it is

required to do by Sec 17 before the injury is done to shippers

The purpose of a

regulation requiring a report is to aid in this

function ofthe Board

The regulation requiring the establishment ofa distribution sys

tem for schedules of rates is necessary for the enforcement and

administration of provisions which prohibit false classification of

property under Sec 16 and the demand of unjustly discrimina

tory rates under Sec 17

Sec 16 is violated only if a false classification is knowing and

willful Where shippers have not had written tariff descriptions

6 F MB
400 FEDERAL MARITIME BOARD

of commodities to read and compare it is virtually imposs

establish knowing and willful misc1assification by shippers 

two or more closely related commodities are involved Dis

nation of tariffs among shippers will eliminate this excus

misclassification to obtain lower rates and wilI remove d

as to whether such actions are taken knowingly and wi

Recent proceedings before the Board have demonstrated th

ficulties shippers and their agent forwarders have in applyi

correct rates to their shipments as the result of inability to 

mine the proper classification because the tariff publicatio

not readily available to them 

Section 17 is violated if a common carrier by water in fo

commerce demands a rate or charge which is unjustly dis

natory between shippers If the Board finds such a rate is 

demanded it may alter the rate to the extent necessary to c

the unjust discrimination The correction cannot be made i

to protect the shipper if the rate is filed after it be

effective The regulation requiring distribution of tariffs 

enable shippers to detect allegedly discriminatory rates a

protect themselves by application tothe Board

General Orders in conformance with this report will b

published in the Federal Register 

VICE CHAIRMAN UNANDER dissenting

The majority of the Board has adopted two rules req

common carriers by water in foreign commerce to file the

iffs with the Board before the date they become effectiv

to distribute their tariffs to interested persons In my op

the Board has not been authorized by Congress to adopt eit

these rules

FILING RULE

The practical effect of the filing rule in Docket No 877 is 

shipper may now be charged only what appears in a tarif

with the Board Before this rule was adopted a shipper co

charged a different rate than that shown in the tariff repo

with the Board because the reports were not made until a

new tariff rate became effective The new rule is a vita

fundamental change from a

reporting requirement to a tar

ing requirement The Board cites Sec 21 of the Shipping 

6 
FILING OF FREIGHT RATES IN U S FOREIGN COMMERCE 401

1916 as amended as authority for its action The pertinent part

of Sec 21 is

The Federal Maritime Board may require any common carrier by

water to file with it any periodical or special report or any rate

or charge appertaining to the business of such carrier Such report

rate charge shall be furnished in the form and within the time pre

scribed by the Board

Any general authorization such as Sec 21 would seem to be in

sufficient as involving an unconstitutional assumption ofrule mak

ing or legislative powers by the Board without sufficiently speci

fic standards A rule which is so fundamental that it changes

a

reporting requirement into a tariff filing reqnirement should

derive validity from a more express statutory authorization than

Sec 21 The purposes of Sec 21 were stated as follows in Is

brandtsenMoller Co v U S 300 U S 139 144 145 1937

The purpose of Section 21 is not far to seek Other sections forbid allow

ance of rebates require the filing of agreements fixing or regulating rates

granting special rates accommodations or privileges which may be dis

approved cancelled or modified if the board finds them unjustly discrimina

tory or violative of the act prohibit undue or unreasonable preferences or

the cutting of established rates and unjust discrimination between shippers

and ports To enable it to perform its functions the board may well need

such information as that which the section gives it power to demand

Traditionally a tariff is a written statement containing a a

list of commodities which may be transported and b a schedule

of rates and implementing regulations governing the application

of the rates A tariff states the common carrier s future charges

for performing his undertaking to the public A tariff is not the

same thing as the reports accounts records rates or charges

or memorandums of facts and transactions appertaining to the

business of a carrier which are referred to in Sec 21 of the Act

The reports referred to in Sec 21 are informative and contain

evidence of past facts They are not required to be filed until

after the events which are reported have occurred This has been

the consistent interpretation placed on Sec 21 by the Board and

its predecessor agencies and is the premise for the adoption of

the order which preceded the present regulation The order was

originally adopted in 1935 and reads in part as follows Itis or

dered in pursuance of the powers conferred by Sec 21 of the

Shipping Act 1916 that acarrier is required to file with

the Division of Regulations each port to port and transhipment

rate charged and or collected for the transportation of prop

erty except cargo loaded and carried in bulk without mark or

6 F M B
402 FEDERAL MARITIME BOARD

count from all points in continental United States of Amer

all points in foreign countries indicating plainly as to each 

rate the place from and to which it was charged an

collected the effective date thereof and any rules or re

tions which in any wise changed affected or determined 

part 

of any such aforesaid rate This is the reportin

quirement that was sustained in sbrandtsen Moller Co v U

States supra

The Court in referring to Hother sections is referring t

regulatory features of the Shipping Act 1916 embodied in 

tions 14 through 19 of the Act 46 U S C 812 818 Secti

grants the Board merely an ancillary power related to 

other sections to require the production of information nece

to the accomplishment of the Board s duties under these 

sections Section 21 grants no substantive regulatory power

ditional to those set forth in the other sections The rule ad

by the majority however seeks to impose a substantive re

tory burden on carriers additional to the duties imposed i

other sections

The legislative history of the Shipping Act 1916 sufficien

lustrates the intent of Congress not to regulate to any degre

ratemaking power of the water carriers in the foreign comm

of the United States The Alexander Committee in its recom

dations stated

it might prove injurious to both ship owners and American export

require the lines to file their rates and not be permitted to lower 

until after a stipulated period of notice to change rates had been 

Investigation of Shipping Combinations Before the House Committ

Merchant Marine and Fisheries 63d Cong Vol 4 p 420 1914

At the hearings on H R 14337 abill to regulate carriers b

ter in the foreign and interstate commerce of the United S

Dr Emory R Johnson commented that

The law however does not provide that the board shall require ca

by water in foreign commerce to file their rates ortariffs

This bill leaves it to the steamship line to work out its rates which 

not have to print even if it does not choose to eertainly it does not h

file them There is no requirement that he has to notify anybody 

it except the party who is interested in it

Under this bill the carrier not only has the power to make the rat

it does not have to publish or file it Hearings on H R 14337 Befor

House Committee on Merchant Marine and Fisheries 64th Cong 1st 

1916 pp 10 12 36 and 38

6F 
FILING OF FREIGHT RATES IN U S FOREIGN COMMERCE 403

Dr Johnson s comment is equally applicable to the present

statute for Section 10 of H R 14337 was substantially identical

with what is now Section 21 of the 1916 Act

The Board s lack of authority to require the filing o tariffs in

foreign commerce is highlighted by the express provision for such

authority which Congress enacted with respect to tariffs in the

domestic trades The Intercoastal Shipping Act 1933 46 V S C

Sections 843 848 enacts such a requirement Itrequires no elab

oration of reasoning to conclude that where Congress wished to

impose a tariff filing requirement instead of a

reporting require

ment upon carriers it knew how to express this requirement with

clarity

The provision in the filing rule which requires reports to be

filed before the date such schedule change modification or

cancellation becomes effective instead of afterwards converts

the former reporting requirement into a fundamentally new type

of provision namely a tariff filing requirement which Congress

has heretofore always authorized in express terms The general

language of Sec 21 may not be converted into such an important

authorization simply by telescoping the present 30 day after the

effective date reporting requirement into an on or before re

porting requirement which has the significant practical effect

on shippers and carriers noted above

It may be that some such control over the freedom of carriers

to adopt rates should be imposed As we have held in Afghan

American Trading Company Inc v Isbrandtsen 3 F M B 622

624 1951 and United Nations et ale v Hellenic Lines Ltd et al

3 F M B 781 786 1952no liability attaches to a carrier merely

because it has charged a rate different from tlat reflected in its

schedules as subsequently reported to the Board The carrier

in short has no legal obligation to adhere to any particular sched

ule of rates If some more rigid requirement ought to be imposed

upon carriers it must be imposed by legislation candidly re

quested and openly canvassed in the proper legislative forum

Then and only then can it fully be explored whether such a de

gree of greater economic regulation is desired In short if the

majority of the Board believes its powers to be too limited under

the existing statute and that the public interest will be served

by a tariff filing requirement these objectives should be achieved

by express legislation and not by the questionable avenue of

patching up the statute by Board announced rules

6 F MB

732 047 0 64 27
404 FEDERAL MARITIME BOARD

TARIFF DISTRIBUtION RULE

The Notice of Proposed Rule Making cites section 204 

chant Marine Act 1936 as one source of authority for the se

proposed rule in Docket No 878 In Carrier lmposed Time 

its for Freight Adjustments 4 F M B 29 34 35 1952 we st

Counsel for the Board urges that Section 204 b is a source o

stantive and novel powers It is true that Section 204 b gives to the 

authority to adopt rules which the Board did not have before but th

tion limits the power to making such rules as are necessary to car

the powers duties and functions vested in the Board

Neither the Shipping Act 1916 as amended nor any subse

legislation has vested any Hpower duty or function in the B

concerning the distribution to the public of freight tariffs 

common carrier by water in the foreign commerce of the U

States The legislative history of the Shipping Act 1916 o

contrary indicates a directly opposite intent on the part o

legislative draftsmen as noted above in the testimony o

Johnson

The comments are particularly persuasive when the Shi

Act 1916 is compared with other statutes regulating tran

tation In the Intercoastal Shipping Act 1933 the only req

ment as to tariff publicity is that carriers shall file their t

with the Board and keep them open to public inspection 

Hsuch schedules shall be plainly printed and copies shall be 

posted in a public and conspicuous place at every wharf 

and office of such carriers where passengers or freight a

ceived for transportation in such mannerthat they will be 

ily accessible to the public and can be conveniently inspe

Section 2 Intercoastal Shipping Act 1933 46 U S C Section 

In the Interstate Commerce Act section 6 6 49 U S C S

6 6 makes a substantially similar requirement as to rai

riers while section 217 a 306 b and 405 b 49 U S C 

tions 317 a 906 b 1005 b expressly vest the IC C wit

thority to make regulations as to posting requirements re

to tariffs of motor carriers water carriers and freight forw

ers respectively Likewise the Federal Aviation Act vest

agency responsible for the regulation of air common ca

with authority to make regulations as to tariff posting re

ments 49 U S C section 1373 a

These statutory provisions dealing expressly with tariff 

ing requirements in transportation fields where federal re

6 
FILING OF FREIGHT RATES IN U S FOREIGN COMMERCE 405

tion is comprehensive and exacting have no counterpart in the

field of transportation by common carriers in foreign commerce

The Shipping Act does not set up nearly as comprehensive or

exacting a regulatory scheme Yet by the proposed rule the

Board would establish tariff distribution requirements which go

beyond those expressly required in these other more extensively

regulated transportation fields What was stated above with re

gard to the need for express delegations of authority on such an

important subject is equally applicable

The notice of Proposed Rule Making Docket No 878 also

cites sections 15 16 and 17 Shipping Act 1916 as authority for

the proposed rule

Section 16 of the 1916 Act confers no rulemaking power on the

Board It merely prohibits certain practices with the principal

objective of assuring like treatment to all shippers who apply

for and receive the same service

Section 15 of the 1916 Act exempts from antitrust statutes

agreements of common carriers by water among themselves or

with other persons subject to the Act In this section the Board

is granted the power to

disapprove cancel or modify any agreement or any modification or can

cellation thereof whether or not previously approved by it that it finds to be

unjustly discriminatory or as unfair as between carriers shippers exporters

importers or ports or between exporters from the United States and their

foreign competitors or to operate to the detriment of the commerce of the

United States or to be in violation of this Act and shall approve all other

agreements modifications orcancellations

Nothing in this section grants the authority to the Board to

promulgate a rule requiring the distribution of carriers tariff

to interested parties In addition the Board cannot under this

section determine a priori that the failure of the conference car

riers to furnish such tariffs to interested parties is either un

justly discriminatory unfair to the detriment of the commerce

of the United States or in violation of the Act The section

clearly states that the Board may disapprove cancel or modify

an agreement only Hif the Board finds that the agreement

has the harmful effects enumerated ill the statute Upon such

a finding the Board may modify such agreements but here there

has been no such finding Hence no rule may be promulgated

pursuant to this section

Finally section 17 also cited in the notice gives no support to

the proposed rule It is true that the first paragraph of section

6 F MB
406 FEDERAL MARITIME BOARD

17 of the 1916 Act places an obligation on every common 

rier by water in foreign commerce to make its rates public 

available on equal terms to all shippers Section 19 Inves

tW11935 1 U S S B 470 502 1935 But there has been no 

ing by the Board that the carriers do not do so On the con

from all indications the opposite appears to be true All ca

heard at oral argument before the Board on this subject s

that at the very least rates are available to all shippers a

carriers offices and a number of carriers stated that they 

fact voluntarily distribute their tariffs to interested partie

The second paragraph of section 17 deals with the esta

ment observance and enforcement by the carriers of reaso

regulations and practices relating to or connected with the re

ing handling storing or delivering of property The Boa

then authorized to determine prescribe and order enforc

just and reasonable regulation or practice when it finds any 

ulation or practice to be unj ust or unreasonable While this 

graph does confer a sort of rule making authority upon the B

such authority does not relate to carrying or transporting 

only receiving handling storing and delivering by the ca

Los Angeles By Products Co v Barber S S Lines Inc 2 

M C 106 113 114 1939 Since the proposed rule is primari

sociated with the transportation by carrier the paragraph 

not confer upon the Board the necessary authority to promu

the rule

For these reasons I conclude that the Board lacks the au

ity to issue a rule establishing any requirement of distrib

of freight tariffs to the public by common carriers by wat

the foreign commerce of the United States Lacking nece

authority the Board cannot promulgate such a rule regar

of how desirous it may be and irrespective of the advisabil

the public interest in the promulgation of such a rule

6 
FEDERAL MARITIME BOARD

No 897

FILING OF PASSENGER FARES IN THE FOREIGN COMMERCE OF THE

U S

Decided June 19 1961

Charles F Warren for CAMEXCO Freight Conference Canal

Central America Northbound Conference CAPCA Freight Con

ference Caribbean Pacific Northbound Freight Conference

COLPAC Freight Conference Pacific Coast Caribbean Sea Ports

Conference Pacific Coast European Conference Pacific Coast

Mexico Freight Conference Pacific Coast Panama Canal Freight

Conference Pacific Coast River Plate Brazil Conference Pacific

West Coast of South America Conference and West Coast South

AmericajNorth Pacific Coast Conference

Edward D Ransom for Trans Pacific Passenger Conferenc

Ronald A Capone for U S Lines

FrankB Stone for American Export Lines Inc

John R Mahoney for Western Hemisphere Passenger Confer

ence

Burton H White for Trans Atlantic Passenger Steamship Con

ference Atlantic Passenger Steamship Conference

John Robert Ewers for Black Ball Transport Inc

William B Ewers for Moore McCormack Lines

W H Parsons for Canadian Pacific Railway Company

REPORT OF THE BOARD

THOS E STAKEM Chairman SIGFRID B UNANDER Vice

Chairman RALPH E WILSON Member

BY THE BOARD

In response to a Notice ofProposed Rule Making published in

the Federal Register April 22 1960 25 FR 2401 the Federal

6 F MB

407
408 FEDERAL MARITIME BOARD

Maritime Board has received and reviewed the public s comm

on proposed rules requiring every common carrier by water in 

foreign commerce 1 to file its schedules of passenger fares 

charges and 2 tofile reports with respect topersons carried 

orat reduced fares

After reviewing the written comments the Board heard 

arguments on August 30 1960 relative to the regulations 

posed

The comments and arguments challenged the Board s auth

to adopt the proposed regulations and poiFlt Gat certain expe

burdens and hardships that will occur in the administratio

the regulations if adopted Changes weresuggested

The regulations are fully authorized by Sec 204 ofthe Merc

Marine Act 1936 as amended Merchant Marine Act an

Sec 21 of the Shipping Act 1916 as amended Shipping 

Sec 204 b of the Merchant Marine Act authorizes the Boa

adopt all necessary rules and regulations to carry out the po

duties and functions vested in it by this act Pursuant to 

204 of the Merchant Marine Act 1936 the functions powers 

duties vested by the Merchant Marine Act were transferred t

U S Maritime Commission Section 105 5 of Reorganiz

Plan No 21 of 1950 transferred to the Federal Maritime Boa

much of the functions with respect to adopting rules and re

tions as relate to the functions of the Board under the provi

ofthe reorganization plan

It is considered that the foregoing authorizations and as

ment of functions give the Board the power to adopt regula

for the administration of Sec 21 and to aid in the enforceme

Secs 16 17 and 21 ofthe Shipping Act

By Sec 21 of the Shipping Act the Board may require 

common carrier by water or any agent or employee to file w

any report record rate or charge or any memorandum of t

actions appertaining to the business of such carrier The 

ments must be furnished in the form and within the time 

scribed by the Board The regulations prescribe a filing at 

30 days before the date any schedule change modificatio

cancellation becomes effective

Sec 16 of the Act makes itunlawful for any common carri

water either directly or indirectly a to give any undue p

ence or advantage to any person in any respect whatsoeve

b to allow any person to obtain transportation for prope

6 F 
FILING OF PASSENGER FARES IN U S FOREIGN COMMERCE 409

less than the regular rates or charges then established and en

forced on the line of such carrier by any unj ust or unfair device

or means Sec 17 makes it unlawful for any common carrier by

water in foreign commerce to charge any rate which is discrimina

tory between shippers or prejudicial to exporters of the U S as

compared with their foreign competitors

Heretofore discovery of violations of these provisions has de

pended upon complaint to the Board This procedure has not re

sulted in the detection of violations which have recently been

shown to exist

The Board considers that a report of passenger fares and free

and reduced rate privileges submitted pursuant to Sec 21 of the

Act will provide information required to discharge its regulatory

r sponsibilities An examination of the reports of passenger fares

and rates applicable to various accommodations and classes will

enable the Hoard staff to determine first whether undue preferen

tial or advantageous treatment is being accorded any particular

person second whether shippers are through the economic ad

vantage derived thereby getting transportation by water for prop

erty at less than the rates or charges otherwise applicable and

third whether transportation has been obtained by an unjust or

unfair device or means The giving of free or reduced fare traps

portation to shippers consignees their officers agents or employ

ees and members of their families may cause a discrimination be

tween shippers and may prejudicially influence the routing of

cargo and may constitute an unfair device or means within the

meaning ofthe Act

A General Order in conformance with this report will be duly

published in the Federal Register
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No 8 126

MOORE lIcCORMACK LINES INC ApPLICA iuN UNDER SEC

805 a

Decided July 21 1961

Moore McCormack Lines Inc granted written permIssIon under S

805 a of the Merchant Marine Act 1936 as amended for its 

vessel the SS MORMACSUN which is under time charter to 

Marine Lines Inc to permit States Marine Lines Inc to subc

said vessel to Matson Line of San Francisco for one voyage of ap

mately one month s duration commencing on or about July 22 19

Matson Line s regular liner service in the domestic trade of the U

States between Hawaii and U S Atlantic ports since grant of perm

found 1 not to result in unfair competition to any person fir

corporation operating exclusively in the coastwise or intercoastal 

and 2 not to be prejudicial to the objects and policy of the Me

Marine Act 1936 as amended

John Rob rt Ewers Ira L Ewers and Willis R Deming of 

sel for Applicant

Wm Jarrel Smith Jr Public Counsel

REPORT OF THE ACTING DEPUTY ADMINISTRATOR

BY THE ACTING DEPUTY ADMINISTRATOR

Moore McCormack Lines Inc Mormac filed an applicatio

written permission under secti n 805 a of the Merchant Ma

Act 1936 as amended 46 VS C 1223 the Act 1for its o

vessel the SS MORMACSVN which is under time charte

States Marine Lines Inc for a period of three to five mo

1 Section 805 a is set forth in Appendix A attached hereto

410

6 M 
MOORE McCORMACK LINES INC SEC 806 a APPLICATION 411

from May 10 1961 to permit States Marine Lines Inc to sub

charter said vessel to Matson Line of San Francisco for one voyage

of approximately one month s duration commencing on or about

July 22 1961 in Matson Line s regular liner service in the domes

tic trade of the United States between Hawaii and U S Atlantic

ports

The application was duly noticed in the Federal Register ofJuly

18 1961 26 F R 6457

No petitions to intervene in the proceeding were received

After hearing on July 21 1961 written permission for one voy

age was granted

The record establishes that there is a demand for increased

cargo space to accommodate the movement of commodities par

ticularly pineapple between Hawaii and U S Atlantic ports

On this record it is found that the granting of the permission

for one voyage will not result in unfair competition to any person

firm or corporation operating exclusively in the domestic coast

wise or intercoastal trades or be prejudicial to the objects of the

Act

6 MA
412 FEDERAL MARITIME BOARD

APPENDIX A

Section 805 a

It shall be unlawful to award or pay any subsidy to any contractor 

authority of title VI of this Act or to charter any vessel to any person 

title VII of this Act if said contractor or charterer or any holding 

pany subsidiary affiliate or associate of such contractor or charter

any officer director agent or executive thereof directly or indirectly 

own operate or charter any vessel or vessels engaged in the do

intercoastal or coastwise service or own any pecuniary interest di

or indirectly in any person or concern that owns charters or operate

vessel or vessels in the domestic intercoastal or coastwise service w

the written permission of the Commission Every person firm or corpo

having any interest in such application shall be permitted to interven

the Commission shall give a hearing to the applicant and the interve

The Commission shall not grant any such application if the Comm

finds it will result in unfair competition to any person firm or corpo

operating exclusively in the coastwise or intercoastal service or th

would be prejudicial to the objects and policy of this Act Provided t

such contractor or other person a1rove described or a predecessor in in

was in bona fide operation as a common carrier by water in the dom

intercoastal or coastwise trade in 1935 over the route or routes or 

trade or trades for which application is made and has so operated sinc

time or if engaged in furnishing seasonal service only was in bon

operation in 1935 during the season ordinarily covered by its operatio

cept in either event as to interruptions of service over which the app

or its predecessor in interest had no control the Commission shall 

such permission without requiring further proof that public interes

convenience will be served by such operation and without further pr

ings as to the competition in such route or trade

cclf such application be allowed it shall be unlawful for any of the p

mentioned in this section to divert directly or indirectly any m

property orother thing of value used in foreign trade operations for 

a subsidy is paid by the United States into any such coastwise or 

coastal operations and whosoever shall violate this provision shall be 

of a misdemeanor

6 M 
DEPARTMENT OF COMMERCE

MARITIME ADMINISTRATION

No S 127

MOORE McCORMACK LINES INC ApPLICATION UNDER SECTION

805 a

Decided July 28 1961

One voyage by the SS ROBIN KIRK commencing on or about July 30 1961

carrying a cargo of lumber and or lumber products from United States

North Pacific ports to United States Atlantic ports found not to result

in unfair competition to any person firm or corporation engaged ex

clusively in coastwise or intercoastal services and not to be prejudicial

to the objects and policy of the Merchant Marine Act 1936 as amended

Ira L Ewers and John Robert Ewers for Moore McCormack

Lines Inc

William Janell Smith as Public Counsel

REPORT OF THE ACTING DEPUTY MARITIME ADM INSITRATOR

BY THE ACTING DEPUTY MARITIME ADMINISTRATOR

Moore McCormack Lines Inc Mormac has applied for writ

ten permission of the Maritime Administrator under section

805 a of the Merchant Marine Act 1936 as amended the Act

46 U S C 1223for its owned ship the SS Robin Kirk which is

under time charter to States Marine Lines Inc States Marine

to engage in one eastbound intercoastal voyage commencing at

a United States North Pacific port on or about July 30 1961

carrying a cargo of lumber and or lumber products for discharge

at United States Atlantic ports Notice of hearing was published

in the Federal Register ofJuly 28 1961 and hearing has been held

before the Acting Deputy Maritime Administrator No petitions

to intervene were filed and no one appeared in opposition to the

application

6 MA

413
414 MARITIME ADMINISTRATION

States Marine the charterer of the SS Robin Kirk conduc

a part of its regular steamship operations an eastbound i

coastal lumber service For this sailing it has been unable to 

any other suitable ship No exclusively domestic operators in 

trade have objected to the use of this ship for this sailing

Upon this record it is found and conclud d that the grantin

written permission under section 805 a of the Act for the 

mac owned ship SS Robin Kirk which is under time chart

States Marine to engage in one intercoastal voyage comme

at a United States North Pacific port on or about July 30 

carrying acargo of lumber and or lumber products to U

States Atlantic ports will not result in unfair competition to 

person firm or corporation operating exclusively in the c

wise or intercoastal service and will not be prejudicial to 

objects and policy ofthe Act

This report shall serve as written permission for the voya
FEDERAL MARITIME BOARD

No 857

EVANS COOPERAGE CO INC V BOARD OF COMMISSIONERS OF THE

PORT OF NEW ORLEANS

Ve6ded August 4 19 H

The practice of assessing a wharf tollage charge on cargo transferred from

barge to ocean vessel moored at respondent s wharf without cargo mov

ing across wharf found not unreasonable or unduly prejudicial Com

plaint dismissed

Rene A Stiegler for complainant Evans Cooperage Co Inc

Evans Transportation Co Inc and Hess Terminal Corp inter

veners and C C Dehne ST for The Arkansas Rice Growers Co

operative Association and Arkansas Grain Corporation inter

veners

Cy1US C Guid1 Y for respondent Board of Commissioners of the

Port of New Orleans F G Robinson for Boarc of Trustees of the

Galveston Vharves G B Pe1TY for Gulf Atlantic Warehouse

Company and JYIanchester Terminal Corporation Ewell P

Walthe1 J1 for Atlas Lubricant Corporation William V Dunne

for International Lubricant Corporation and Thomas A Maxwell

for Delta Petroleum Com any Inc Interveners

REPORT OF THE BOARD

THOS E STAKEM Chai1man RALPH E WILSON Member

BY THE BOARD

1 PROCEEDINGS

Evans Cooperage Co Inc Evans filed a complaint against the

Board of Commissioners of the Port of New Orleans Commis

415

6 F M B
416 FEDERAL MARITIME BOARD

sioners on June 10 1959 alleging violations of Sees 16 an

of the Shipping Act 1916 as amended Act Evans Trans

tation Co the Arkansas Rice Growers Cooperative Associ

and Arkansas Grain Corp Gulf Atlantic Warehouse Co and 

chester Terminal Corp Hess Terminal Corp the Board 

Trustees of Galveston Wharves International Lubricant C

Delta Petroleum Co and Atlas Lubricant Corp petitioned 

were granted leave to intervene

Hearings were held before an Examiner followed by an in

decision served on May 19 1961 Exceptions and replies have 

filed but oral argument was not requested

II FACTS

Complainant manufactures and reconditions steel ship

drums and barrels and barrels liquid commodities such as v

table and lubricating oil for shippers in the export trade C

plainant places the shipments on barges which are towed 

its plant across the Mississippi to New Orleans and tied to 

stream side of ships moored at respondents wharf The shipm

are loaded from the barge by the ship s gear without passing 

the wharf

The respondent s tariffs provide that vessels engaged in for

and coastwise trade shall be assessed a harbor fee to assi

defraying the expense of administration and maintenance o

port and harbor All cargo or freight including mail is also 

ject to a Wharf Tollage Charge as follows 3 Such c

or freight is delivered to or received from vessels by other w

craft or when transferred over the side of vessels directly 

from the water B When said vessels are moored ou

of otherwater craft occupying berths at wharves docks land

mooring facilities or other structures The rate of w

tollage is 28 per ton of 2000 lbs or fraction thereof W

Tollage is defined as A charge against cargo based on the 

ber oftons received or discharged by vessels

The tariff also provides that mined products in bulk transfe

directly from barge to a vessel while such vessel is moored 

public facility within the port are exempted from the payme

wharf tollage We concur in these and the other findings of 

by the Examiner

6 F M
III DISCUSSION

EVANS COOPERAGE CO INC v BOARD OF COMMISSIONERS 417

Insofar as pertinent Sec 16 of the Act provides that it shall be

unlawful for any person subject to the Act directly or indirectly

to make or give any undue or unreasonable preference or advan

tage to any particular person locality or description of traffic in

any respect whatsoever or to subject any particular person local

ity or description of traffic to any undue or unreasonable prejudice

or disadvantage in any respect whatsoever and Sec 17 provides

that every person subject to the Act shall establish observe and

enforce just and reasonable regulations and practices related to

or connected with the receiving handling storing or delivering of

property The respondent commissioners do not question that

they are other persons subject to the Act and therefore subject

to the Board s jurisdiction

The Examiner found that the practice of assessing a wharf

tollage charge on cargo transferred from a barge to a ship

moored at respondent s wharf was not unreasonable or unduly

prejudicial The complainant excepts as follows

1 To the conclusion that the evidence is convincing that the

wharf tollage charge was not designed to cover specific services

2 To the conclusion that the cargo and the barge here involved

enjoy substantial benefits from the services and facilities pro

vided by respondent

3 To the failure to discuss undue preference and prejudice

against the complainant as the result of exempting from tollage

bulk mineral cargoes

4 To the finding that complainant makes use of the wharf

which is designed and constructed to stand the stress and strain

of barges tied to ships moored atthe wharf

5 To the failure ofthe Examiner to give weight to certain testi

mony that the handling of barge to ship cargo at Houston and

Galveston was inconsequential and therefore there is none of such

traffic that they could lose

6 To the failure of the Examiner to discuss other charges paid

by the ship at New Orleans whereby it is already being charged

for all of the services it is claimed complainant should pay for

7 To the failure of the Examiner to consider the special tollage

rate on liquids loaded via pipelines that actually use the wharf

8 To the finding of the Examiner that the practice complained

ofis more or less uniform throughout the country

6 F MB
418 FEDERAL MARITIME BOARD

9 To the failure to consider the expense on the commission 

30 days free time on the wharf for lotsof 5000 tons or more

10 To the finding that no evidence of unreasonablenes

charges exists and that the record affords no basis upon w

a reallocation of costs charges and services could be mad

unreasonableness were shown

11 This is a general exception to the decision

Exceptions 1 2 4 5 6 8 9 and 10 all deal with the unrea

ableness of the charges under Sec 17 of the Act and exceptio

and 7 deal with the competitive inequality issues under Sec 

The first second fourth sixth and tenth exceptions in effec

that the charges are unreasonable because no specific servi

rendered to the complainant and that the Examiner did not 

sider the evidence showing this The Examiner however 

sidered evidence that wharf tollage does not necessarily cove

penses and services directly rendered to the cargo and also 

weight to the opinions of complainant s witness on this point 

Examiner found that complainant s barge and the cargo inv

enjoyed substantial benefits from the services and facilities 

vided by the respondent Complainant s barge was tied to 

ship and such mooring would not be possible unless the w

berth was dredged deep enough to accommodate the ship an

less the mooring facilities were adequate for the ship P

protection was also present and not denied to the compla

regardless of the fact that direct vision by the policeman m

be difficult The fire tug was available for protection without 

charge having been levied thus far except for the cost of chem

used in fire fighting Both forms of protection had to be pai

by users of respondent s property as well as those who shar

overall benefits including incidental benefits of the commis

facilities The fact that the operators of the ship must also 

charges was considered and not found to be controlling

Complainant contends that by definition it is an essentia

ment of wharf tollage that the cargo pass over the wharf and 

the charge should be for the use of the wharf to avoid 

unreasonable We do not need to be too concerned about 

definitions of wharf tollage The commission has made a c

to help defray its costs of operating facilities as measure

cargo handled in the area and the only question is wheth

facilities are being used and the commission is performing a 
EVANS COOPERAGE CO INC v BOARD OF COMMISSIONERS 419

ice reasonably related to its charges The Examiner considered

the evidence and found that it was

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 no basis upon which rea

sonable allocation of costs could be made Terminal Rate Struc

ture California Ports 3 U S M C 57 60 69 1948

The subject of the third and seventh exceptions was considered

by the Examiner when he compared the exemption of mined

products with the liquid products handled by the complainant as

well as the special tollage rates on liquids moved through pipelines

under the wharves The evidence showed that this type of service

is different from that given to the complainants The police and

fire protection given the different services likewise differs Since

the services are not comparable no discrimination or prejudice is

involved in establishing different charges therefor as the Exam

iner concluded Moreover the greater value ofthe liquid products

in drums or barrels was shown to precluce any competitive rela

tionship as well as justify different charges

The testimony of the other port witnesses referred to in the

fifth exception was considered by the Examiner The fact that the

transfer of cargo from barge to the ship was inconsequential or

small does not lessen the probative value of the testimony as noted

in the Examiner s decision The fact is that a charge is assessed

at Galveston and Houston for the same type of services and the

elimination ofthe charge at New Orleans would be adverse to the

practices observed at these two ports Its use at these and other

ports tends to establish this type of charge as an accepted and

reasonable trade practice

With regard to the eighth exception complainant cites the prac

tices in New York where there is no wharfage or tollage on cargo

that is lightered alongside of ships However it does appear to

be the practice in the Gulf area to make such a charge the New

York area undoubtedly reflects such costs in charges for other

services

With regard to the ninth exception complainant appears to con

tend that because it does not burden wharf space with its cargo

it releases such space for other cargo and accordingly should be

allowed credit to the extent that it should not be charged for wharf

tollage Whether the specific space alongside the ship being serv

iced is so utilized by others or not does not alter the obligation of

6 F MB
6 F M

420 FEDERAL MARITIME BOARD

maintaining the facility and of assessing users of the fa

reasonable charges which will provide continued existence o

facility

The initial decision of the Examiner is sustained
EVANS COOPERAGE CO INC v BOARD OF COMMISSIONERS 421

ORDER

At a Session of the FEDERAL MARITIME BOARD held at its

office in Washington D C on the 4th day of August 1961

No 857

EVANS COOPERAGE CO INC V BOARD OF COMMISSIONERS OF THE

PORT OF NEW ORLEANS

This case being at issue upon complaint and answer on file

and having been duly heard and submitted by the parties and full

investigation of the matters and things involved having been had

and the Board on the date hereof having made and entered of

record a report stating its conclusions and decision thereon

It is orde red That the complaint in this proceeding be and it

is hereby dismissed

By the Board

Sgd THOMAS LISI

Secretary

6 F M B
No 726

FEDERAL MARITIME BOARD

ISBRANDTSEN Co INC

v

STATES MARINE CORPORATION OF DELAWARE ET AL

No 732

H KEMPNER

v

LYKES BROS STEAMSHIP CO INC ET AL

No 733

H KEMPNER

v

LYKES BROS STEAMSHIP CO INC ET AL

No 734

GALVESTON COTTON COMPANY

V

LYKES BROS STEAMSHIP CO INC ET AL

No 735

TEXAS COTTON INDUSTRIES

V

LYKES BROS STEAMSHIP CO INC ET AL

Decided August 4 1961

Exclusive Patronage Contracts and Dual Rate Systems used by the Fa

Conference and by the Gulf Mediterranean Ports Conference fou

be pursuant to agreements filed with the Federal Maritime Boar

approved by the Board The agreements filed by Far East Confe

and Gulf Mediterranean Ports Conference found not to be unjust

criminatory or unfair as between shippers or carriers or to oper

the detriment of the commerce of the United States orto be in vio

of Sec 15 of the Shipping Act 1916 as amended

6 F 

422
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 423

States Marine Corporation of Delaware a common carrier by water found to

have demanded charged and collected a rate which is unjustly discrimi

natory between shippers in violation of Sec 17 of the Shipping Act 1916

as amended

Waterman SS Corp a common carrier by water found to have demanded

charged and collected a rate which is unjustly discriminatory between

shippers in violation of Sec 17 of the Shipping Act 1916 as amended

Isbrandtsen Co Inc complainant entitled under Sec 22 of the Shipping Act

1916 as amended to reparation for the injury caused by the violation of

said Act by States Marine Corporation of Delaware and Waterman SS

Corp inthe amount of 6 687 28

Isbrandtsen Co Inc found not to have proven violations of the Shipping Act

1916 as amended including Sees 14 15 and 16 thereof by the Far East

Conference or by any of its members

Complainants Harris L Kempner Trustee Galveston Cotton Co and Texas

Cotton Industries Inc shippers found not to have proven violations of

the Shipping Act 1916 as amended including Sees 14 15 16 and 17

by the Far East Conference orby the Gulf Mediterranean Conference or

by any of the members thereof

Motion of respondents other than Isthmian Steamship Company to remand

the record and the recommended decision to the chief examiner with

directions to rule on additional findings denied

John J O Connor and John J O Connor Jr for Isbrandtsen

Co Inc

Richard W Kurrus for Isbrandtsen Co Inc

Delmar W Holloman and Shelby Fitze for Harris L Kempner

Trustee Galveston Cotton Co and Texas Cotton Industries Inc

Herman Goldman Elkan Turk Elkan Turk Jr Seymour H

Kligler and Sol D Bromberg for Far East Conference and its

members other than Isthmian Steamship Co

Walter Carroll for Gulf Mediterranean Ports Conference and

its members

Frank Gormley Robert B Hood Jr Robert C Bamford Ed

ward Aptaker and Robert E Mitchell Public Counsel

REPORT OF THE BOARD

THOS E STAKEM Chairman RALPH E WILSON Member

BY THE BOARD

I PROCEEDINGS

These proceedings involve five complaints of excessive

freight charges for the shipment of cotton from Gulf of Mexico

ports in 1951 1952 and 1953

6 F M B
424 FEDERAL MARITIME BOARD

In Docket No 726 Isbrandtsen Co Inc lsbrandtsen 

shipper complains that the Far East Conference Far East 

its twenty member and five associate lines violated Secs 14 1

and 17 of the Shipping Act 1916 as amended Act by a re

to carry cotton to Japan either pursuant to an exclusive pa

age contract or subject to the lower freight charges appli

to shippers having such a contract Isbrandtsen also comp

that Far East s system of requiring an exclusive patro

contract as a prerequisite to lower freight rates had not been 

with the Board and in any event may not be approved by 

Board if it is filed Overcharges by specified carriers on 

of lading to the prejudice of and in discrimination ag

Complainant and in violation ofthe Shipping Act 1916 and 

laws of the United States are charged by Isbrandtsen in D

No 726

In Docket No 732 Harris L Kempner Trustee Kempne

a shipper complains that specified common carriers by w

the Gulf Mediterranean Ports Conference Mediterranean 

its members violated the same sections of the Act by a re

to carry cotton to Italy Yugoslavia and Spain under si

conditions

In Docket No 733 Kempner as a shipper complains that 

cified common carriers by water the Far East Conference 

its members violated the same sections of the Act by a re

to carry cotton to Japan Indo China and the Philippines u

similar conditions

In Docket No 734 the Galveston Cotton Co Galveston 

ton as a shipper complains that specified common carrier

water the Far East Conference and its members violated 

same sections of the Act by a refusal to carry cotton to Ja

under similar conditions

In Docket No 735 Texas Cotton Industries Inc Texas Co

as a shipper complains that specified common carriers by 

ter the Far East Conference and its members violated the 

sections of the Act by a refusal to carry cotton to Japan u

similar circumstances

The complaints in Docket Nos 732 733 734 and 735 als

leged that actions complained of will constitute violation

the Shipping Act and the Sherman Anti Trust Act Repara

damages and other relief are asked for by all ofthe complain

At a prehearing conference June 25 1953 the five sep

proceedings were consolidated for hearing on a single re

6 F 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 425

Docket Nos 726 733 734 and 735 contain complaints against the

Far East Conference and its members and Docket No 732 con

tains a complaint against the Mediterranean Conference mem

bers An Examiner submitted a recommended decision on No

vember 8 1957 The recommended decision was followed by the

submission of exceptions and replies thereto followed by oral

argument before the Board on February 10 1959 No report was

issued in view of pending litigation and Congressional legislation

and subsequently two new members of the Board were appointed

The present Board decided to hear oral argument on the exist

ing record prior to making its decision We heard further oral

argument on May 3 1961

II FACTS

Isbrandtsen s complaint is directed primarily at States Ma

rine Corporation of Delaware States Marine and Waterman

Steamship Corp Waterman common carriers by water and

members of Far East to recover 6 687 28 as reparations for ex

cess freight charges in the amount of 4 00 a ton on 6320 bales

or about 1 672 short tons of cotton carried to Japan Far East

since February 1950 has followed the practice of charging ship

pers who sign exclusive patronage contracts 4 00 per short ton

less than its established tariff rates for shipments of cotton Is

brandtsen was not a party to an exclusive patronage contract

at the time of the shipments in question Isbrandtsen became

a shipper of cotton as the result of its inability to charter a ship

to carry cotton which Kempner had booked with Isbrandtsen as

a common carrier by water Isbrandtsen sought to discharge its

obligation to Kempner by having the cotton shipped by States

Marine and Waterman The shipments were transported to

Japan pursuant to 51 bills of lading showing Isbrandtsen as lhe

shipper and dated from August 3 1952 to September 18 1952

Reparations were claimed in the amount of 5 455 from States

Marine and 1 232 28 from Waterman Isbrandtsen paid the

freight at non contract rates

Kempner s complaint in No 732 is directed primarily at six

common carriers by water members of Mediterranean to re

cover reparations indicated for overcharges on bills of lading

as follows

Lykes Bros Steamship Co Lykes 6 861 19

26 bills oflading dated from 3 15 51 to 10 27 52

6 F M B
Kerr Steamship Company Kerr

2bills oflading dated 1231 51

States Marine

22 bills oflading dated from 3 27 51 to 12 15 52

Societa Italiano de Armamento SIDARMA Sidarma

10 bills of lading all dated 6 7 51 1 779 

Compania Maritima del Nervion Nervion 1 562 

1 bill of lading dated 8 26 52

Sociata Anonima N avigazione Alta Italia

Creole Line

17 bills oflading dated from 2 23 51 to 1 29 52

The cotton was shipped to Italy Yugoslavia and Spain 

terranean charges 25c 30c and 35c per 100 Ibs extra for c

not shipped pursuant to an exclusive patronage contract

Kempner s complaint in No 733 covers a similar cause 

tion naming the following common carriers by water and 

the purpose of recovering the reparations indicated for 

charges on bills of lading as follows

Lykes

69 bills oflading dated 2 15 51 to 12 31 52

States Marine

77 bills oflading dated from 2 28 51 to 9 30 52

Kokusai Lines et al Kokusai

12 bills oflading dated 11 13 51 to 9 30 52

Mitsui Steamship Co Ltd Mitsui

13 bills of lading dated 11 30 51 to 8 25 52

Kawasaki Kisen Kaisha Ltd Kawasaki

lbill oflading dated 11 15 52

Nippon Yusen Kaisha Ltd Nippon

23 bills of lading dated 9 19 51 to 11 28 52

Fern Ville Far East Lines et al Fern Ville

10 bills oflading dated 5 31 52 to 9 9 52

Galveston Cotton s complaint in No 734 covers a similar ca

action naming the following common carriers by water a

for the purpose of recovering the reparations indicated for 

charges on bills of lading as follows

Lykes

77 bills oflading dated 2 9 51 to 12 31 52

Nippon

38 bills of lading dated 9 19 51 to 11 26 52

Fern VUle

7 bills of lading dated 5 31 52 to 12 18 52

426 FEDERAL MARITIME BOARD

47

1 836 

2 436 

19 288 

12 73

1 860 

2 374 

103 

4 708 

2 408 

8 787 

4 82

1 079 

6 F 
ISBRANDTSEN CO INC ET AL v STATES MARINE E1 AL 427

Waterman

1 bill oflading dated 7 12 51

Kokusai

9 bills of lading dated 11 11 51 to 9 30 52

Mitsui

12 bills of lading dated 11 30 51 to 7 26 52

States Marine

90 bills oflading dated 4 30 51 to 11 22 52

Texas Cotton s complaint in No 735 covers a similar cause of

action naming the following common carriers by water and is for

the purpose of recovering the reparations indicated for over

charges on bills oflading as follows

Lykes 1 139 30

9 bills oflading dated 4 15 52 to 8 4 52

Nippon 518 86

1 bill of lading dated 11 28 52

Fern Ville 31142

1 bill of lading dated 7 31 52

Kokusai 106 78

1 bill oflading dated 9 30 52

States Marine 379 64

3 bills oflading dated 5 27 52 to 8 15 52

10 17

1 286 62

2290 85

11 483 17

The carriers in docket Nos 733 734 and 735 were members of

the Far East Conference

The Mediterranean Conference is associated pursuant to a con

tract made on the 28th day of December 1929 first approved by

the U S Shipping Board on January 23 1930 It has operated

under successive agreements and amendments the latest of

which was approved June 2 1954 Agreement No 134 19 Dur

ing the period of the actions covered by the complaint Mediter

ranean was operating under the conference contract as amended

and approved to July 21 1950 The conference contract of Medi

terranean has never and does not now contain any provisions

expressly authorizing the use of an exclusive patronage con

tract nor differentials in freight rates for contracting shippers

The record did not contain any minutes of meetings at which

the contract and IIdual rate system was formally adopted by

Mediterranean but the following two xtracts from minutes es

tablish the existence of the practice on the dates of the actions

referred to in the complaint

6 FM B
428 FEDERAL MARITIME BOARD

1 TUESDAY JUNE 21 1949

10 30 A M

E S BINNINGS

CHAIRMAN

CONFERENCE CONTRACTS ON COTTON

Gulf French Atlantic Hamburg Range Freight Conference

Gulf Mediterranean Ports Conference

The Executive Secretary reported verbally to the meeting on wha

spired since the joint meeting of the Conferences on June 16 1949 

nection with the Conference contracts on Cotton

Considerable discussion was had and the States Marine Corporatio

informed that the Conference Contract System on 9otton which was 

mously approved by all members of the two Conferences had already a

been established to become effective as of July 1 1949 at the request 

Special Committee of the A merican Cotton Shippers Association and 

careful consideration and study by that Committee and the Cotton Com

of the Conferences

None of the other Member Lines of the Conferences would agree 

pending the contracts for various reasons including the fact that th

tracts had been definitely announced to commence July 1 1949 and 

time of the meeting more than forty five 45 shippers had accept

contracts

This subject was continued on the docket and the meeting recessed s

to call by the Executive Secretary of the Conferences

2 CONFERENCE MEETING OF FEBRUARY 1 1950

Recordation is herein made that the Joint Conference Cotton Contrac

ittee and the Special Committee of the American Cotton Shippers 

Ciation late in the afternoon of February 1 1950 agreed on the fol

which was officially announced on behalf of the Gulf French Atlantic 

burg Range Freight Conference and the Gulf Mediterranean Ports C

nce by the Executive Secretary of those Conferences in a special lette

Wednesday evening February 1 1950 to the Member Lines of the C

ences

Effective as of February 2 1950 through June 30 1951 repeat n

fiftyone the date of the bill of lading to govern application of 

COTTON Basis High Density Bales contract basis 140 per 10

Standard Compressed Bales 190 per 100 lbs to all ports in the 

Atlantic Bordeaux Dunkirk range and Antwerp Ghent Rott

Amsterdam Bremen Hamburg and all Mediterranean Base ports in

Spanish Mediterranean Base ports

An addendum in the form of a letter from the Executive Secret

cover this extension of the Conference Cotton Contracts is being pr

6 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 429

and will be forwarded to all Cotton Contract signers both shjppers and

receivers for their necessary and prompt acceptance

All other conditions of the Conference Cotton Contracts Bordeaux Ham

burg range and Mediterranean remain unchanged

The record disclosed no denial that Mediterranean followed

the practice of offering exclusive patronage contracts and dual

rates

Far East is an association of common carriers by water in the

foreign commerce of the United States acting pursuant to a

Memorandum of Agreement made between the parties sig

natory on the first day of September 1922 approved by the U S

Shipping Board on November 14 1922 Agreement No 17 At

the times referred to in the complaints Far East was operating

under such agreement as amended and approved through Sep

tember 7 1951 The contract contains no provisions expressly

authorizing the use of an exclusive patronage contract or dif

ferentials in freight rates for contracting shippers

Prior to the association evidenced by the 1922 memorandum of

agreement an agreement was reached in a conference of rep

resentatives of steamship lines and a representative vf the U S

Shipping Board Emergency Fleet Corporation at meetings on

April 12 and April 19 1920 concerning the obligations of carriers

to each other with respect to their operations between North

Atlantic ports in the U S and the Far East The transcript uf

the minutes is the only evidence of the agreement The minutes

of the meeting refer to the assemblage as Conference No 17

At that time the carriers were all companies acting as manag

ing agents of ships operated by the U S Shipping Board Emer

gency Fleet Corporation A letter dated May 5 1920 relative to

legality of the conferences signed by the Examiner in Charge

DIVISION OF REGULATIONS of the Shipping Board refers

to the transcript ofminutes as follows

An examination of these papers does not disclose any objectionable

features they will be accepted and filed under Sec 15 of the Federal Ship

ping Act and may be regarded as tentatively approved Proceedings within

the scope of this Conference as outlined in these papers will be lawful unless

you shall be hereafter notified to the contrary

I note that you will arrange to forward to this office copies of futui e

minutes agreements tariffs and rates as may be authorized by the Con

ference

The record does not contain any further directives by the gov

ernment concerning the filing of transcripts of minutes but the

6 F M B
430 FEDERAL MARITIME BOARD

practice of submitting such papers to the government ap

o have been followed thereafter The Board s General O

No 76 promulgated November 1952 however requires 

of statements concerning the initiation of dual rate contra

rangements by carriers See Sec 15 Inquiry 1 U S S B 

1927

At the conclusion of hostilities in World War II cotton fr

rates were controlled by a government agency until 1949 

commercial shipments of cotton were resumed but there w

offer of a rate differential until 1950

The transcript of an extract from the minutes of a s

meeting of Far East held on February 16 1950 contains a 

ment that This Special Meeting was called to hear furthe

port of Conference Counsel with respect to Cotton cont

and the following

On the question as to whether or not the Conference s

proc ed with the contract on Cotton upon Motion seconde

carried it was unanimously agreed that the Chairma

instructed to mail the contract to the Cotton Shippers for 

signature

Special rate differentials for cotton shipped pursuant t

clusive patronage contracts are first evidenced by a routine 

iff revision effective as of February 7 1950 approved at a 

ing on February 14 1950 which was followed by the Februa

action noted above relative to the issue of a contract to p

du l rate into effect 

Minutes of Conference meetings are reduced to writing 

copies have been transmitted to the Federal Maritime 

or its predecessor agencies Standard Board practice is 

view these documents and if action believed to be contra

law is shown to make the matter a subject of official corres

ence or of formal proceedings If no illegal actions are s

the papers are filed and no further administrative action is t

A transcript of minutes showing the action of Fat East 

tending its contract rate practice to include cotton was filed 

the Board

No minutes or memorandum or other evidence of any a

ment to revise rescind or revoke the foregoing action by 

Conference had been filed with the Board by January 1 

Isbrandtsen in No 726 signed a Memorandum of A

ment made the 10th day of January 1946 with Far Eas

member carriers agreeing in consideration of the rate

6 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 431

other conditions stated to forward by vessels of the Car

riers all shipments to ports in Japan Far East under date

of October 1 1948 sent contract shippers including Isbrandtsen

proposed Amendments to Conference Freight Contract with

the condition that if you should omit to accept this proposal on

or before November 1 1948 we shall terminate this agree

ment effective December 1 1948 Isbrandtsen omitted to

accept the proposal No new agreement was made covering the

period of the bills of lading in evidence Isbrandtsen asked Far

East for a contract for its August 1952 shipments but the Con

ference representative advised that it would not permit Isbrandt

sent to sign a contract to cover these shipments and States

Marine advised that even if Isbrandtsen obtained a freight con

tract States Marine would not carry the cotton Isbrandtsen

tendered

Kempner in No 732 signed a Memorandum of Agreement

made the 12th day of July 1949 with Mediterranean and member

carriers agreeing in consideration of the rates and other con

ditions stated to offer to the Carriers for transporta

tion by them to all ports served on the Mediterranean Sea

On May 16 1950 Kempner was alleged to have shipped cot

ton on a nonconference ship and thereby to have failed to offer

his cargo to the member carriers After an exchange of tele

grams and correspondence beginning June 27 1950 regarding

this failure Mediterranean by letter dated July 14 1950 assessed

damages pursuant to the agreement in the amount of 6 010 20

against Kempner nd advised that failure to pay in 30 days would

be cause for termination of Kempner s

right to contract rates

until paid as provided in the agreement On July 27 1950 Medi

terranean advised Kempner that the non contract basis of rates

will be applicable effective on and after August 17 1950 Kemp

ner did not pay the damages assessed against it and has paid

non contract rates since August 17 1950

Kempner in No 733 signed a Memorandum of Agreement

made the 7th day of February 1950 with Far East and member

carriers designating therein under its signature as Subsidiary

Associated and or Parent Companies Galveston Cotton Com

pany and agreeing in consideration of the rates and other con

ditions stated to forward by vessels of the Carriers all ship

ments made to ports in Japan By letter dated September

25 1950 Kempner wrote Far East we herewith tender our res

ignation from the Far East Conference Agreement The agree

6 F M B
432 FEDERAL MARITIME BOARD

ment provides that it may be terminated upon 90 days w

notice by the Shipper Kempner The resignation wa

strued as a termination by the parties effective Decemb

1950 No new agreement was made covering the period o

bills of lading in evidence

Neither Galveston in No 734 nor Texas Cotton in No 

is a party in its own name to an exclusive patronage co

with 2ither Far East or Mediterranean Galveston is a 

Corporation which is a wholly owned subsidiary of H Kem

a Massachusetts Trust Texas Cotton is a Texas corporatio

50 ofits stock is owned by H Kempner

Kenlpner never asked for a new shippers contract and 

this action never claimed a right to ship at contract rate

On the dates of all the shipments forming the basis of 

plaints herein no other adequate means were available to 

plainants to transport the shipments of cotton

The differential between tariff rates for persons havin

clusive patronage contracts for the transportation of cott

Far East members and for those not having such contract

400 per ton and by Mediterranean carrier members was 

Far East Conference carriers had however allowed ship

of other commodities by Isbrandtsen between New Yor

Japan at contract rates for a period of time immediately p

ing August 1952 Such contract rates were extended to Isl

sen even though its was not a party to a shipper s exclusiv

tronage contract

On the ships which carried Isbrandtsen s cot on at pon co

rates in August and September 1952 all of the other cott

board was carried at contract rates During the period in 

tion the conference lines also shipped cotton for spot 

brokers and forwarders at contract rates and considered 

persons as shippers even though they did not own the cotton 

shipped

Isbrandtsen paid 13 373 96 the difference between the 

Kempner paid Isbrandtsen and the non contract rate pa

Isbrandtsen for shipping Kempner s cotton Isbrandtsen d

pass on to the buyer the extra freight paid to the c

ence lines

The following is a summary of outside competition m

conference iines in the Gulf Far East trade during the 

1949 1955 Iil 1949 4 non conference lin rsailings and 34 

sailings in 1950 15 non conference liner sailings and 29 

6 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 433

sailings in 1951 a non conference liner sailing applying confer

ence contract rates and 38 tramp sailings in 1952 54 tramp sail

1ngs in 1953 5 non conference liner sailings and 68 tramp

sailings in 1954 one non conference liner sailing and 77 tramp

sailings and in 1955 61 tramp sailings

DISCUSSION

The complainants in all five of these proceedings seek to have

the dual rate contract arrangement in use by Far East and

Mediterranean made illegal underthe Act

The complainants after alleging the use of dual rate con

tract non contract system in the Far East and Mediterranean

trades state that such system is unlawful for the following reas

ons 1 the use of the system contravenes the provisions of Sec

14 of the Act 2 the use of the form of shipper s contract and of

rate differentials in the tariffs of the conferences has never been

approved by the Board under Sec 15 of the Act and may not be

approved under Sec 15 3 the system and the dual rates used

are unduly and unreasonably prejudicial and disadvantageous to

persons in violation of Sec 16 of the Act and 4 the system this

term is used herein interchangeably with arrangement and

the dual rates used are unjustly discriminatory between shippers

and are unjustly prejudicial to exporters of the United States in

violation of Sec 17 ofthe Act

If the arrangements have been agreed to by common carriers

by water and thereafter carried out in whole or in part without

Board approval the arrangements are illegal for this reason

under Sec 15 and for no other reason If the arrangements em

bodied in agreements have been approved by the Board on the

other hand it cannot be argued here that the arrangements are

illegal unless a court has interpreted the Act to say so notwith

standing the Board s approval If any Court has done so we

hold as hereinafter noted that Sec 14 of the Act restricts our

authority to construe or apply the Act to make unlawful any dual

rate contract arrangement in use on May 19 1958 The ar

rangement or system referred to herein consists of confer

ence action to 1 adopt and tender to shippers an exclusive

patronage contract and 2 issue tariffs containing rate differ

entials for contracting shippers

The procedure by which agreements between carriers are de

clared legal or illegal under the Act is that they be 1 filed with

the Board pursuant to Sec 15 2 reviewed and 3 passed on for

6 F M B
434 FEDERAL MARITIME BOARD

legality There is no filing requirement until there is an 

ment or ameeting of minds by two or more common carrie

water or other persons subject to the Act regarding act

described in Sec 15 Until common carriers by water or 

persons subject to the Act agree to put rate differential

effect and to tender shippers exclusive patronage con

the so called arrangement is a trade practice or sim

part of the commercial environment in which common ca

by water and other persons subject to the Act operate The 

practice must be distinguished from agreements The ar

ment is put into effect through agreements commodity by 

modity as the needs of the trade appear to dictate 

present case the cotton shippers wanted a contract and th

ference as the minutes herein show put the arrangemen

effect by the actions at conference meetings Agreements 

into being at the time the common carriers by water whi

members of Far East and Mediterranean agreed to offer 

shippers rate differentials by means of tariff revisions a

tender them exclusive patronage contracts Complainants 

fect challenged the validity of the actions evidenced b

meetings of Far East on February 16 1950 and ofMediterr

on February 1 1950 when they assert the unlawfulness 

dual rate exclusive patronage contract If the agree

reached at these meetings violate any provision of the A

operate to the detriment of the commerce of the United 

or are unjustly discriminatory or unfair as between carrie

shippers they may be disapproved by the Board If the 

tice system or arrangement resulting from these 

ments violates any provision of the Act the Board ma

award complainants reparations under Sec 22 for the 

ifany caused by the violation

The facts showing that Mediterranean filed and obtained 

approval of a conference contract and filed transcripts o

utes of its meetings showing agreement among its me

for the adoption of the practice of offering dual rates and e

ive patronage contracts and filed tariffs containing dua

provisions establishes that Mediterranean has filed an agre

pursuant to Sec 15 The fact that Far East also filed trans

of extracts from the minutes of its meetings showing adop

the practice of offering dual rates and exclusive patronag

tracts for cotton shippers as well as the filing of tariffs sh

dual rates established that Far East filed its agreements 

Ii 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 435

suant to Sec 15 These transcripts have been reviewed by the

Board s staff and no exception taken thereto Board approval

ofboth agreements is required Isbrandtsen Co Inc v U S 211 F

2d 51 D C Cir 1954 cert den 347 U S 990 1954 and ap

proval has been given The Board s approval was neither sub

sequent nor retroactive but existed at the time it accepted tariff

changes showing dual rates and did not disapprove the results

of the conference meetings and the tariff revisions by order

Empire State Highway Transport Assn v F MB U S A and

American Export Lines Inc 291 F 2d 336 D C Cir 1961

The Board has followed for many years the administrative

practice of initiating proceedings and of issuing orders where

agreements were to be disapproved under Sec 15 and where or

ganic agreements and modifications thereof are approved Sec

tion 15 Inquiry 1 V S S B 121 1927

Sec 15 authorizes the Board to disapprove by order but not

approve by order All other agreements may simply be ap

proved Approval has been tacit where no action was taken and

no order was issued and this has always been considered as ap

propriate and consistent with Sec 15 Section 15 Inquiry supra

Other forms of approval by the issue of written statements have

heretofore not been considered a necessary technique of admin

istering the Act Limitations of staff compelled the use of the

technique which was followed Since the decision in Isbrandt

sen Co Inc v U S supra and Rive Plate Brazil Conferences

v Pressed Steel Car Co Inc 227 F 2d 60 2d Cir 1955 how

ever new approval procedures have been instituted

The purpose of filing agreements under Sec 5 of the Act is

to give the Board the opportunity to review the agreements to

determine their conforlnity with the standards specified in Sec

15 The complaint is that such a review will show the agreement

to use the dual rate exclusive patronage contract system by

common carriers by water does not conform and particularly

that it violates Sec 14 of the Act This contention has been re

viewed in the past by the courts in several cases but none of the

cases declare the practice or system unauthorized under all cir

cumstances In U S Nav Co v Cunard S S Co 284 V S 474

1932 the plaintiff sought to enjoin the defendant steamship

lines from using the contract rate system on the ground that

such practice violated the Sherman Anti Trust Act C 647 26 Stat

209 Title 15 D S C 1 7 and the Clayton Act C 323 38 Stat

730 Title 15 V S C 12 27 The decree dismissing the bill of

6 F M B
436 FEDERAL MARITIME BOARD

complaint was affirmed on the ground that the Act cove

dominant facts alleged as constituting a violation of the 

Trust Acts particularly Sec 14 of the Act which prohibits 

liation by common carriers by water against a shipper by 

ing to discriminating or unfair methods If the system 

illegal under any circumstances the dismissal because 

Board s primary jurisdiction would have been a useless 

and the court should have passed on the issue then and 

The case of Swayne Hoyt Ltd v U S 300 U S 297 193

volved an appeal from an order of the Secretary of Com

The Secretary s order had enjoined the use of the exclusi

tronage contract rate system in the intercoastal trade o

ground that as he interpreted the evidence the operation 

contract system in the circumstances of the case would n

fer substantially from the deferred rebate system outlaw

both foreign and coastwise shipping by Sec 14 of the Act 

case is not authority for the conclusion that any contrac

system is unlawful The court said Even though as app

seem to argue the evidence may lend itself to support a di

inference we are without authority to substitute our jud

for that of the Secretary that the discrimination was unr

able at 307 Unreasonable discrimination not illegality 

any circumstance wasthe basis of the decision

In Isbrandtsen Co Inc v United States et al 96 F Sup

D S D C S D N Y 1951 affd 342 D S 950 1952 the 

showed that the North Atlantic Continental Freight Conf

on October 1 1948 sent notices to all known shippers 

North Atlantic trade that effective November 1 1948 the e

ive patronage contract noncontract rate system would be 

urated and that shippers who refused to enter into contra

ship with the conference lines exclusively when they coul

vide transportation were to be charged 20 to 30 highe

the contract rates The Board by its order of December 1 

3 F M B 235 dismissed a complaint alleging illegality in 

action The plaintiff Isbrandtsen the Attorney General a

Secretary of Agriculture joined in contending that in no c

stances can a dual rate provision Le exclusive patrona

dual rate or contract noncontract provision in a confe

agreement be valid under Sec 14 The court said for th

poses of this decision we assume that as the Board con

under some circumstances the Board may pursuant to 4

6 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 437

C A S 814 approve a conference agreement containing such a

provision

The court however set aside the Board s oI der and enjoined

the conference from acting pursuant to the dual rate provision on

the ground that the 20 to 30 differential in rates had been ar

bitrarily selected and decided that the Board itself made the ex

aminer s

finding to this effect its own The case was appealed

to the Supreme Court which affirmed the decision of the District

Court without opinion in A S J Ludwi g Mowinckels Redeir v

sbrandtsen Co 342 U S 950 1952 In Far East Confe1 ence v

United States 342 U S 570 1952 the Attorney General brought

a suit under the Sherman Anti Trust Act supra to enjoin de

fendants from using the exclusive patronage contract rate sys

tem The important distinction between this case and the

Cunard case above was that now the government rather than a

private shipper was seeking to enjoin the maintenance of dual

rates This fact was held to be immaterial and since the Board

was the expert agency responsible for administering the Act

the court held that administrative remedies before the Board

must be exhausted before resort may be had before the courts

Here again the court declined to hold that the contract rate sys

tem was unlawful under any circumstances

Up to this point we do not construe any of these decisions as

outlawing the trade practice of common carriers by water agree

ing to tender shippers exclusive patronage contracts which pro

vide for less than tariff rates and of issuing tariffs containing

rate differentials for shippers having exclusive patronage con

tracts We construe the present status of the law as follows 1

where an issue as to the validity of agreements among common

carriers by water to use exclusive patronage contracts and dual

rates is concerned the complaint and facts must first be pre

sented to the Board for decision 2 where we find the operation

of an exclusive patronage dual rate system has the effect of

creating deferred rebates or unreasonable discrimination we

must hold the agreement to maintain the system is unlawful 3

dual rate differentials which are arbitrarily selected must be

held invalid and 4 a dual rate system which is agreed to for the

purpose of curtailing competition and an agreement to offer an

exclusive patronage contract containing provisions tying ship

pers in such a way as to have the effect of stifling outside com

petition must both be held unlawful

Finally on May 19 1958 the Supreme Court in Maritime Board

r

1

un
43H FEDERAL MARITIME BOARD

v Isb l andtsen Co Inc 356 U S 481 1958 passed on the iss

illegality under all circumstances Isbrandtsen filed a pe

to review an order of the Board in Docket No 730 Con

Rates Japan Atlantic Gulf Freight Confer ence 4 F M B 

1955which order approved under 15 the agreempnt emb

in a statement filed by the Conference The Conference s 

ment proposed to initiate an exclusive patronage contract

contract freight rate system dual rate system in the trade 

Japan Korea and Okinawa to U S Gulf Ports and Atlantic 

Ports The Court held In view of the fact that in the pr

case the dual rate system was instituted for the purpose o

tailing Isbrandtsen s competition thus becoming a device 

illegal by Congress in 14 Third we need not give contro

weight to the various treatments of dual rates by the Boar

der different circumstances The Court had stated that 

to shippers not designed to have the effect of stitli g ou

competition are not made unlawful Whether a particular 

designed to have the effect of stifling outside competition 

question for the Board in the first instance to determine 

circumstances here were that the conference was trying to 

outside competition

Our approval of the Mediterranean and Far East confe

agreements and of their subsequent agreements to initiate 

exclusive patronage contract dual rate system to the carriag

cotton and the consistency of such approval with court dec

has been noted above The main question now is whethe

former approval must be revised as a result of the last Isbr

sen decision

The complainants claim is that we now lack authority t

prove a dual rate system because Sec 14 Third provides th

common carrier by water shall Retaliate against any sh

by refusing or threatening to refuse space accommoda

when such are available or resort to other discriminatin

unfair methods because such shipper has patronized any 

carrier or for any otherreason

The Circuit Court had stated since the dual rate system 

constitutes retaliation it must be condemned without rega

the question of its reasonableness as are deferred reba

Isbrandtsen Co Inc v United States 239 F 2d 933 D C 

1956 Cert granted 353 U S 908 1957 The Supreme Cou

firmed the result which was to set aside the Board s orders 

sofar as they approve thee exclusive patronage contract

1 lo 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 439

contract rate system of the Japan Atlantic Gulf Freight

Conference but for different reasons it held that Sec 14 Third

strikes down dual rate systems only where they are employed

as predatory devices and precise findings by the Board as

to a particular system s intent and effect are essential to a ju

dicial determination of a system s validity under the statute

Isbrandtsen at 499

We are called on to make precise findings as to the intent and

effect of the arrangement as a result of the Isbrandtsen deci

sion and of respondents Far East motion to remand the record

and the recommended decision filed November 3 1958 after the Is

brandtsen decision to decide whether the arrangement should

now be disapproved as a result of the findings herein about the

system s intent and effect and to decide whether our former ap

proval should be revoked

On August 12 1958 Congress enacted P L 85626 72 Stat 574

amending the section ofthe Shipping Act on which the Isbrandt

sen decision was based Sec 14 so as to hold valid any dual rate

contract arrangement in use by the members of a Conference on

May 19 1958 Anglo Canadian Shipping Co Ltd et al v United

States 264 F 2d 405 409 9th Cir 1959

Before discussing the effect of P L 85626 and the amendment

of Sec 14 Third on complainants claims on the precise findings

required and on the Isbrandtsen decisions a short summary of

the history of the trade practice and of agreements relating to

exclusive patronage contracts and dual rates willthrow some light

on the retaliatory predatory and discriminatory aspects of the

arrangement and on its intent and effect

Steamship freight conferences came into being in 1875 to pro

vide regular services and fixed rates of freight which were the

same to all shippers In return for regular service and stable

rates the associated steamship lines sought assurances from

shippers of their exclusive support for all members of the con

ference Shippers supporting the conferences also sought pref

erential freight rates over those who did not The assurances

of support took two forms the deferred rebate system and the

contract system and rate differential Under the deferred re

bate system shippers who confined their shipments to confer

ence lines for stated periods can claim a rebate at the end of

each period measured as a percentage of the freight paid and

payable at a later date Under the contract system shippers are

6 F M B
440 FEDERAL MARITIME BOARD

required to sign a contract in advance and to confine all th

shipments to conference lines In return they either receiv

discount on freight rates or else lower rates of freight than n

contractors Penalties are usually prescribed for violation of 

contract

Two significant conclusions emerge from this summa

first the use of exclusive patronage contracts providing 

less than tariff rates was an established trade practice long 

fore the Act in 1916 and existed at the time of the Act and 

ond the trade practice was brought about principally in respo

to demands of shippers rather than as a result of confere

efforts to improve the members competitive position vis a 

outsiders The intent and effect of the dual rate contract tra

tionally is not to meet ouside competition The conference ag

ments between carriers may have been designed to regulate c

petition but not the exclusive patronage contract betw

carriers and shippers nor the differential in freight rates wh

the contract provided The carrier shipper relation is the o

one involved here The inter carrier relation was involved in 

Isbrandtsen case

The trade practice of requiring a shipper tie to a confere

by means of the contract and rate differentials for contrac

shippers is what has come to be known as a contract syst

or as the dual rate system or the exclusive patronage 

rate contractjnoncontract system or a dual rate cont

arrangement

Since this trade practice was so well known in American 

British ocean commerce by 1916 it would have been anoma

for Congress in 1916 to outlaw the system by inference ra

than expressly as it did in the case ofrebates

Since 1916 the public policy aspects of shippers contracts 

rate differentials as trade practices have not been success

challenged Certain aspects of the arrangement such as ex

sive rate differentials have been invalidated because they w

arbitrarily selected A S J Ludwig Monwinckels Reda

Isb1 andtsen Co supra or were undue or unreasonable Swa

and Hoyt Ltd v United States supra the administrative 

cedIres r

fonnality cf approval under Sec 15 have teEn dec

improper River Plate Brazil Conferences v Pressed Steel 

Co Inc sup1 a and the U S Shipping Board has condemned 

arrangement where it operates solely to effect a monopoly E

6 F l
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 441

Mining Co v Bluefields Fruit SS Co 1 U S S B 41 1922 but

the trade practice itself had never been declared invalid per

se until the Court of Appeals said so in the Isbrandtsen case

239 F 2d 933 in 1956 This unqualified holding however

does not appear to us to have been fully sustained by the Su

preme Court in 1958

Weare inclined to believe that the latest Isbrandtsen case did

not affirm that part of the Circuit Court decision 239 F 2d 933

which set aside the Board s orders in so far as they approve the

exclusive patronage contract non contract rate system as a

general proposition but affirmed such decision only to the extent

of disapproving the Japan Atlantic and Gulf Freight Conference

arrangement which used the particular shippers contract to in

jure the plaintiff an independent common carrier by water

Up to this point and until 1958 a period of about 83 years fol

lowing the formation of the first shipping conference in 1875

the shippers exclusive patronage contract and rate differentials

have survived legislative inquiry and judicial scrutiny in both

Great Britain and America without being found to be a retali

atory device and as such sufficiently contrary to public policy to

justify remedial legislation or adverse court orders

In 1958 in the Isbrandtsen case the Supreme Court concluded

on the premise of our finding the dual rate contract of the Japan

Atlantic and Gulf Freight Conference was a necessary competi

tive means to offset the effect of Isbrandtsen s non conference

competition that the arrangement was a resort to other discrimi

natory or unfair methods in violation of Sec 14 Third of the Act

Notwithstanding 1 the special facts of the present case show

ing there have been no unjustified reductions in freight rates i

e

rate cutting 2 the fact that shippers and not carriers are

complainants herein and 3 the absence of significant independ

ent liner competition for cotton out of the Gulf since WorId War

II all of which alter the premises herein the complainants and

respondents adopted differing views about the effect of the Is

brandtsen decision

Insofar as the decision invalidated practices heretofore gen

erally used for over 83 years in the seaborne foreign commerce

of the U S it had a profound effect upon the industry and action

by Congress followed The cause for Congressional action was

stated in the report of the Senate Committee on Interstate and

Foreign Commerce to accompany S 3916 Report 1709 Senate

85th Cong 2d Sess as follows Whether the above language

6 F M B
442 FEDERAL MARITIME BOARD

from the Court s opinion would justify operation of a dua

system if it is not directed at a non conference competito

competitors or whether as Justice Frankfurter construed 

a dissenting opinion it declares illegal all dual rate system

certainly not clear About the only point rendered unmista

clear by the two opinions is that as a result of the Court s 

sion the shipping industry is likely to be plagued with w

spread confusion and endless litigation over the months and 

sibly years ahead

After the Supreme Court decision on May 19 1958 

the Committee s Report on June 13 1958 Congress enacted 

lic Law 85 626 72 Stat 574 which as amended by Public 

86542 74 Stat 253 and by Public Law 87 75 75 

195 amended Sec 14 Third of the Act to provide that nothi

the Act shall be construed or applied to forbid or make un

ful any dual rate contract arrangement in use by the membe

a conference on May 19 1958 which conference is organized u

an agreement approved under section 15 of this Act by 

Board unless and until the Board disapproves or modifies 

arrangement in accordance with the standards of Sec 15 o

Act This amendment is in effect until September 15 19

The Committee s action put a stop to litigation over the 

of the Isbrandtsen decision but in its place litigation began 

the interpretation of the amendment of Sec 14 Third of the 

The New York Supreme Court in Pasch v Chemoleum C

209 N Y Supp 2d 191 N Y Sup Ct Oct 11 1960 had the 

lowing to say about the effect ofthe amendment

The legislative history of this amendment makes plain the intent

Congress by this legislation to provide the industry with a morat

during which Congress might study and investigate to the end that a

priate legislation might thereafter be enacted Petitioner assert

amendment preserves the validity of the dual rate contracts now unde

sideration Respondents argue to the contrary and contend the a

ment was intended to do no more than preserve the status quo tha

been disturbed by the adjudication of the Supreme Court of the U

States in the later Isbrandtsen case that it was not the intention o

gress to limit the effects of the adjudication in the earlier Isbrandtsen 

and as a consequence the amendment must be deemed to include the 

fication that exclusive patronage dual rate contracts must in any 

have been approved by the Federal Maritime Board to acquire valid

I reach a different conclusion Respondents contention as to the me

of the amendment works a distortion in the language employed by Co

which plainly states unless and until such regulatory bod

approves cancels or modifies such arrangement in accordance wi

standards set forth in section 15 of this Act It would have been a 

6 F 
matter for Congress if it desired to do so to insert appropriate language

in the amendment limiting the validity of the dual rate contracts to those

actually approved by the Board It is incredible to assume that Congress

was wholly unaware of the earlier Isbrandt en case when it enacte J the

legislation I conclude Congress neither intended nor desired to limit the

effect of the amendment in the manner suggested by respondents

ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 443

Later the following on this case was stated by Justice McGiv

ern in Pasch v Chemoleum Corporation 210 N Y S 2d 738 1960

before the Appellate Division of the Supreme Court

In any event any infirmity which may have existed in the contract was

cured by the enactment on August 12 1958 of Public Law 85 626 72 Stat

574 which amended section 14 of the Shipping Act 46 U S C 812

The dual rate contract arrangement of petitioner was in existence on

May 19 1958 and it is conceded that the conference was one organized

under an agreement approved under section 15 of the Shipping Act by the

regulatory body administering the act Under the circumstances in the

abspnce of any evidence that the regulatory body has disapproved can

celed or modified the dual rate contract form theretofore filed with it on

February 26 1953 by petitioner in compliance with the regulatory body s

General Order 76 directing it to supply complete information as to the

dual rate contract arrangement then in force this court must find the

contract executed by petitioner and respondent valid P 742

More recent support for this conclusion is found in the Report

of the Committee on Merchant Marine and Fisheries to accom

pany H R 6775 on June 8 1961 87th Congo 1st Sess House of

Representatives Report No 498 interpreting Sec 14 Third of

the Act as amended by P L 85 626 in 1958 and P L 86 542 in

1959 as follows

In view of the grave doubts cast by the Supreme Court decision upon thE

legality of the dual rate system and the possible detrimental results to both

American shipping and American foreign commerce legislation was enacted

in the 2d session of the 85th Congress to authorize the continuation in force

of any existing dual rate contract arrangement until June 30 1960 em

p asis supplied

The arrangement of Far East and Mediterranean was in use

by members of the Conference on May 19 1958 The Confer

ences were organized under agreements approved under Sec 15 of

the Act Sec 15 requires an order if the Board is to disapprove an

agreement The standards for determining the lawfulness of

an arrangement set forth in Sec 15 are 1 is the arrangement

unjustly discriminatory or unfair as between shippers and car

riers 2 does the arrangement operate to the detriment of the

commerce of the U S and 3 is the arrangement in violation of

the Act

We have found that the arrangements of Mediterranean and

6 F M B
444 FEDERAL MARITIME BOARD

Far East are embodied in arrangements heretofore approv

the Board and in use by the members of the conferences o

19 1958 The question now is whether we should disappro

modify these arrangements by revoking our prior appro

On the present record no independent common carrier b

tel is complaining of the retaliatory or predatory effect 

arrangement Instead as shown in complainant s mem

dum in recent oral argument before us and in the exce

and replies filed after the Isbrandtsen decision it is argu

a group of shippers that the historically established trade 

tices are contrary to public policy and were outlawed by 

gress in Sec 14 of the Act The Supreme Court howeve

found that the arrangement of the Japan Atlantic and 

Freight Conference used the shippers contract and its 

rates as a predatory device and as evidence thereof refer

a shippers exclusive patronage contract containing oppr

conditions The Court stated the dual rate contract

require the carriers to carry the shipper s cargo only so 

their regular services are available rates are subject to 

onable increase within two calendar months plus the une

portion of the month after notice of increase is given 

member of the Conference is responsible for its own pa

in this Agreement the agreement is terminable by either 

on three months notice and for a breach the Shipper sha

as liquidated damages to the Carriers fifty pel centum 

of the amount of freight which the Shipper would have pa

such shipment been made in a vessel of the Carriers at the 

tract rate currently in effect Until payment of the liqu

damages the shipper is denied the reduced rate and if he v

the agreement more than once in 12 months he suffers c

lation of the agreement and the denial of another until all 

dated damages have been paid in full The shippers con

in this record are similar to the shippers contracts befo

Supreme Court

Because of this similarity with the contracts in this reco

the Court s inference therefrom that such an oppressive co

plus a dual rate system constitutes a predatory device it 

gued that we should hold that the actions of Mediterranea

Far East violate Sec 14 although as far as this record 

cerned there is no evidence whatever that the carrier s a

in adopting the shippers contract and the dual rate was d

at any other carrier

6 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 445

The circumstances of this case are that the shippers contract

was asked for by the shippers themselves The contract was

not adopted as an anti outside carrier device but as an accom

modation to shippers desiring stable conditions in the trade which

would give them assured service at reasonably firm and level

rates for predictable periods We find no evidence in this record

to show that the drafting and tender of the shippers contract or

that the rate differential established in the published and filed

tariffs was a competitive device was designed to stifle outside

competition or even had this effect No carrier introduced any

evidence to this effect

The absence of substantial non conference liner competition

and the absence of any complaint by carriers in independent non

conference liner service and the circumstances under which cot

ton shippers negotiated the exclusive patronage contracts leads

us to conclude that the arrangement herein was not unjustly dis

criminatory or unfair between shippers and carriers was not

retaliatory did not stifle outside carrier competition and does

not violate the Act

The Examiner has found that the differentials in rates of each

conference are not discriminatory or unfair or detrimental to

the commerce of the U S or in violation of the Act We have

reviewed the record of the facts on which this finding is based

have no disagreement therewith and concur with the Examiner s

finding

In view of the history of the exclusive patronage contract

and rate differential arrangements we conclude that such ar

rangement does not operate to the detriment of the commerce

of the U S We conclude further that the dual rate and exclus

ive patronage contract herein was not a resort to other discrim

inatory or unfair methods against the shipper complainants

herein in violation of Sec 14 of the Act We find no reason to

disapprove the agreements of Far East and Mediterranean here

tofore filed with the Board

We conclude further that system and rates thereunder are

not unduly and unreasonably prejudicial and disadvantageous to

persons in violation of Sec 16 of the Act and are not unjustly

discriminatory between shippers and unjustly prejudicial to ex

porters of the United States in violation of Sec 17 of the Act as

claimed in respondents complaints

The complainants also asked for reparations based on viola

tions ofthe Act

6 F M B
446 FEDERAL MARITIME BOARD

The facts showing that APL East Asiatic Maersk and 

gave Isbrandtsen the lower contract rates without the nece

for a contract and then in August and September other co

ence members demanded the payment of non contract rate

tablished that Isbrandtsen was discriminated against by S

Marine and Waterman in violation of Sec 17 of the Act Se

forbids any common carrier by water in foreign commerce 

charging any rate which is unjustly discriminatory between 

pers States Marine and Waterman as members of Far 

failed to extend to Isbrandtsen the same rates which other 

ference members had granted earlier

Respondents claim that Isbrandtspn is not a shipper and th

fore cannot claim that he has been discriminated against 

shipper Isbrandtsen s name appears as the shipper on the 

of lading in evidence signed by the masters of respondent s s

the cargo described ther on was taken aboard and transpo

and Isbrandtsen s freight payments as shipper were acce

Isbrandtsen s name also appears on all other shipping 

uments As a shipper Isbrandtsen tried to get a contract 

contract rates but was refused both At the same time S

Marine and Waterman were carrying the same kind of co

for other shippers at contract rates under identical condit

States Marine and Waterman refused to give Isbrandtsen s

lar rates As a result of these actions Isbrandtsen was cha

a rate which was unjustly discriminatory between shippers 

brandtsen showed further that it incurred expenses lost pr

and suffered damage to the extent of its out of pocket expe

at the result of the denial of a contract and payment of the hi

rates Eden Mining v Bluefields at 1 U S S B 41 1922 

spondents did not prove any mitigating factors affec

Isbrandtsen s damage although the burden was on them to d

Roberto Hernandez Inc v Arnold Bernstein Etc 116 F 2d 

2nd Cir 1941 cert den 313 U S 582 1941

Kempner and Galveston signed a shippers contract on 

ruary 7 1950 and terminated their contract September 25 1

effective 90 days later on December 24 1950 as shown Un

Isbrandtsen no new contract was requested These respond

were never unjustly refused a contract rate Consequently 

shipments made during and after January 1951 Kempner 

Galveston could not claim status as contract shippers and w

not discriminated against Kempner and Galveston were 

6 F M 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 447 

given the lower contract rates during any period when they did

not have a contract

Texas Cotton never had a shippers contract with either Medi

terranean or Far East Kempner in the only Far East shippers

contract it had did not list Texas Cotton as a subsidiary affiliate

or parent company No contract existed at any time on which

Texas Cotton either assumed the obligations to patronize the con

ference exclusively or acquired the right to ship at the lower

contract rates either independently or as a subsidiary This re

spondent wasnever unjustly refused a contract rate

Since none of the complainants in Dockets No 732 733 734

and 735 could validly claim status as contract shippers nor ever

received contract shippers rates during a period when they did

not have a contract there has been no discrimination against such

complainants

1sbrandtsen s claim for reparations under Sec 22 of the Act has

been found to be the result of discrimination We have recently

held that overcharges and discriminations have quite different

consequences as far as reparation is concerned A different

measure of recovery applies where the shipper has paid the ap

plicable rate non contract and sues upon the discrimination

caused by other shippers having to pay less or by being unjustly

refused the contract rate Swift Co and Swift Co Packers

v Gulf South Atlantic Havana SS Co et al 6 F M B 215

1961 In the Swift case thecomplainantwas given the op

portunity to prove its damages at a further hearing Although

the basis for the decisions are the same such further proceed

ing is not necessary here because Isbrandtsen has only asked

for the sum of 5 455 with interest from re pondent States

Marine Corp of Delaware and 1 232 28 with interest from

the respondent Waterman SS Corp In the Swift case com

plainants had asked for reparations and other relief as a result

of the damage suffered from the enforcement by the conference of

certain contract provisions against Swift Accordingly States

Marine and Waterman will be ordered to pay to complainant 1s

brandtsen on or before 60 days from the date of our Order 6 687

28 with interest at the rate of 6 per annum on any amount un

paid after 60 days as reparation from the injury caused by the

respondent s violation of Sec 17 of the Act

We have reviewed the record as well as the conclusions of the

Supreme Court in the second Isbrandtsen case and the subse

6 F M B
448 FEDERAL MARITIME BOARD

quent relevant Acts of Congress Under the circumstances i

not considered that the motion of respondents other than Is

mian Steamship Company to remand the record and the r

ommended decision to the examiner with the directions to r

on additional findings should be granted The motion w

be denied

After due investigation and hearing our conclusions in resp

to the five complaints are as follows

1 Complainant Isbrandtsen in Docket No 726

a has proven its complaint of a violation of Sec 17 of 

Act by States Marine Corp of Delaware a common carrier 

water and shall be paid on or before 60 days from the date 

our order herein with interest at the rate of 6 per annum 

every day after such 60 days until paid the sum of 5 455 

reparation for the injury caused by said violation

b has proven its complaint of a violation of Sec 17 of 

Act by vVaterman SS Corp a common carrier by vater a

shall be paid on or before 60 days from the date of our or

herein with interest at the rate of 6 per annum for every 

after such 60 days until paid the sum of 1 232 28 as reparat

for the injury caused by said violation

c has not established that respondents should be ordered 

cease and desist from using the exclusive patronage dual r

contract non contract system or such contracts with shippe

or from using the spread and differential of four dollars 4 

per ton and any other spread or differential between contr

and non contract tariff rates or participating in such contrac

d is not entitled to any other additional and further re

2 Complainant Kempner in Docket No 732

a has not proven its complaint of a violation of the Ac

Lykes Bros SS Co Inc

b has not proven its complaint of a violation of the Act 

Kerr Steamship Company

c has not proven its complaint of a violation of the Act 

States Marine Corporation of Delaware

d has not proven its complaint of a violation of the Act 

Societa Italiana de Armamento SIDARMA

e has not proven its complaint of a violation of the Act 

Compania Maritima del Nervion

f has not proven its complaint of a violation of the Act 

Societa Anonima N avigazione Alta Italia Ltd Genoa Cre

Line

Ii F M 
ISDRANDTSEN CO INC ET AL v STATES MARINE ET AL 449

g

has not established that respondents should be ordered

to cease and desist from the violations of the Act complained of

or from using a dual rate contract non contract type of tariff

involving a spread or differential now being charged or any other

differential or charge which will not be available to contract and

non contract shippers alike

h is not entitled to any other and further relief

An order dismissing the complaint will be entered

3 Complainant Kempner in Docket No 733

a has not proven its complaint of a violation of the

Act against Lykes Bros Steamship Co Inc

b has not proven its complaint of a violation of the Act by

States Marine Corp ofDelaware

c has not proven its complaint of a violation of the Act by

Kokusai Lines Joint Service

d has not proven its complaint of a violation of the Act by

Mitsui Steamship Co Ltd

e has not proven its complaint of a violation of the Act by

Kawasaki Kisen Kaisha Ltd

f has not proven its complaint of a violation of the Act by

Nippon Yusen Kaisha Ltd

g

has not proven its complaint of a violation of the Act by

Fern Ville Far East LinesjBarber Fern Ville Lines Fearnley

Eger and A F Klaveness Co AjS

h has not established that respondents should be ordered to

cease and desist from the violations of the Act complained of or

from using a dual rate contractjnon coI 1tract type of tariff in

volving a spread or differential now being charged or any other

differential or charge which will not be available to contract

non contract shippers alike

i is not entitled to any other and further relief

An order dismissing the complaint will be entered

4 Complainant Galveston Cotton Co in Docket No 734

a has not proven its complaint of a violation of the Act by

Lykes Bros Steamship Co Inc

b has not proven its complaint of a violation of the Act by

Nippon Yusen Kaisha Ltd

c has not proven its complaint of a violation of the Act by

Fern Ville Far East LinesjBarber Fern Ville Lines Fearnley

Eger and A F Klaveness Company AjS

d has not proven its complaint of a violation of the Act by

Waterman Steamship Corp

6 F M B
450 FEDERAL MARITIME BOARD

e has not proven its complaint of a violation of the Ac

Kokusai Lines Joint Service

f has not proven its complaint of a violation of the Ac

Mitsui Steamship Company Ltd

g

has not proven its complaint of a violation of the Ac

States Marine Corp ofDelaware

h has not established that respondents should be ordere

cease and desist from the violations of the Act complained o

from using a dual rate contract non contract type of tarif

volving a spread 01 differential now being charged or any o

differential or charge which will not be available to contract 

non contract shippers alike

i

is not entitled to any otherand further relief

An order dismissing the complaint will be entered

5 Complainant Texas Cotton Industries in Docket No 73

a has not proven its complaint of a violation of the Ac

Lykes Bros Steamship Co Inc et al

b has not established that respondent should be ordere

cease and desist from the violations of the Act complained o

from using a dual rate contract non contract type of tarif

volving a spread 01 differential now being charged or any o

differential or charge which will not be available to con

and non contract shippers alike

c is not entitled to any otherand further relief

An order dislnissing the complaint will be entered

6 F 
ISBRANDTSEN CO INC ET AL v STATES MARINE ET AL 451

ORDER

At a Session of the FEDERAL MARITIME BOARD held

at its office in Washington D C on the 4th day of August 1961

No 726

ISBRANDTSEN Co INC

V

STATES MARINE CORPORATION OF DELAWARE ET AL

No 732

H KEMPNER

V

LYKES BROS STEAMSHIP CO INC ET AL

No 733

H KEMPNER

V

LYKES BROS STEAMSHIP CO INC ET AL

No 734

GALVESTON COTTON COMPANY

V

LYKES BROS STEAMSHIP CO INC ET AL

No 735

TEXAS COTTON INDUSTRIES

V

LYKES BROS STEAMSHIP CO INC ET AL

These proceedings being at issue upon complaints and

answers on file and having been duly heard and submitted by the

parties and full investigation having been had and the Board

6 F M B

732 047 0 64 30
452 FEDERAL MARITIME BOARD

on the date hereof having made and entered of record a repo

containing its conclusions and decision thereon which said re

port is hereby referred to and lnade part hereof

Itis Orcle1 ed as follows

1 That respondent States Marine Corporation of Delawar

be and it is hereby notified and directed to pay unto complaina

Isbrandtsen Co Inc of 26 Broadway New York 4 New Yor

on or before 60 days from the date hereof 5 455 with intere

at the rate of 6 per annum on any amounts unpaid after 60 day

as reparation for the injury caused by respondent s violation 

Sec 17 of the Shipping Act of 1916 as amended

2 That respondent Waterman Steamship Company be an

it is hereby notified and directed to pay unto complainant 1

brandtsen Co Inc of 26 Broadway New York 4 New York o

or before 60 days fron1 the date hereof 1 232 28 with interest 

the rate of 6 pel annun1 on any amounts unpaid after 60 day

as reparation for the injury caused by respondent s violation 

Sec 17 ofthe Shipping Act of 1916 as amended and

3 That the motion of the respondents other than Ist

mian Steamship Company to remand the record and re

ommended decision to the examiner with directions to rule 

additional findings be and it is hereby denied

The proceedings arE dismissed

By the Board

Sgd THOMAS LISI

Sec retu y

Ii F M 
TABLE OF COMl10DITIES

Bananas Ecuador to Atlantic ports 262

Oigarettes New York N Y to Ponce and San Juan P R 48

Oigars New York N Y to Ponce and San Juan P R 48

Explosives Absorption or equalization 139

Fibre OOncrete t01oms Classification 189

Glass Articles Misclassification and misbilling 155

Paper Products Misclassification 235

Silica Misclassification 289

Tobacco New York N Y to Ponce and San Juan P R 48

453

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