Jan 7, 2000 Volume 4, Number 1 Oakland, California

SIGNALS™ provides detailed information on the regulations and activities of the US Federal Maritime Commission (FMC), and related developments in the ocean freight industry. For past issues, please consult our index.

In this issue, we discuss these industry developments:

• Dombrowski Named FMC Managing Director: replaces the retiring Ed Walsh
• Anti-Rebating Certification Not Required for 2000: but rebates are still prohibited
• Docket 99-17: Imex Shipping Inc. Settles With FMC for US$ 55,000
• Docket 98-14: FMC Demands Information from China Shipping Container Lines
• FMC Investigation into Eastbound Transpacific Trade Ends Quietly

Dombrowski Named FMC Managing Director:    replaces the retiring Ed Walsh(Optional)

Bruce A. Dombrowski has replaced Edward P. Walsh as Managing Director of the Federal Maritime Commission. Effective January 1, 2000, Bruce Dombrowski assumed the Managing Director's position after having held several senior level positions during a 26-year career with the FMC. Mr. Walsh served as the Commission's Managing Director for 13 years. In a statement to the press, FMC Chairman Hal Creel said "Ed Walsh was the longest-running Managing Director in FMC history for good reason. His counsel, advice and perspective were invaluable to numerous Chairmen and Commissioners, while his ability to effectively lead the staff was indispensable to the Commission."

Mr. Dombrowski has served as Counsel to Chairman Creel since January 1997. Prior to that he was the Commission's Deputy Managing Director for 10 years. He was a key player in the FMC's implementation of new regulations required by the Shipping Act of 1984, and by the Ocean Shipping Reform Act of 1998 (OSRA).

David Miles of the Commission's Office of General Counsel has been appointed as Counsel to the Chairman, replacing Mr. Dombrowski. Mr. Miles has been with the Commission since 1978. Since 1984 he has served as the Commission's Legislative Counsel; he served as the agency's key liaison with Congressional committees in the years leading to enactment of the Ocean Shipping Reform Act.

The Ocean Shipping Reform Act of 1998 (OSRA) did not eliminate the prohibition on illegal rebating, but it did drop the certification requirement. As many of our readers will recall, in years past, the chief executive officer of each carrier under FMC's jurisdiction was required to submit a notarized certification to FMC by December 31^st of each year. The purpose of this filing was to certify compliance with the Shipping Act's prohibitions on rebating. Under the new OSRA regulations illegal rebating is still prohibited, but the certifications are no longer required.

Imex Shipping Inc., a Newark, NJ based NVOCC, has paid US$55,000 to the FMC to settle alleged violations of the Shipping Act. According to Docket 99-17, the FMC alleged that Imex received rebates from a vessel-operating common carrier (VOCC) in the trade between the United States and South America. In the settlement agreement, Imex agreed to end the business practices that formed the basis for the violations alleged by FMC. Also, it agreed to maintain measures designed to eliminate such practices in the future. Imex provided the FMC with information on possible violations of the Shipping Act by other parties, but it did not admit violations of the Shipping Act.

The recent entry of China Shipping Container Lines Co. Ltd. (China Shipping) into the transpacific trade has prompted the FMC to issue another "Information Demand Order." This order is similar to orders previously issued to US and Chinese flag carriers in the trade. It requires China Shipping, which is majority owned by the Chinese government, to submit detailed information to the FMC about its operations in China and in the USA. This information will assist the FMC in determining the extent to which Chinese laws, rules or regulations lead to conditions unfavorable to shipping in the USA-China trade, and it will aid the Commission in developing any further actions that may be appropriate.

FMC Docket 98-14 was initiated in August 1998, and it remains on going. In response to complaints by US flag carriers serving the Peoples Republic of China, the FMC has found serious restrictions on the ability of non-Chinese carriers to operate branches and subsidiaries in China. Moreover, the Chinese rules for licensing of liner services, and proposed regulations for tariff and service contract filing, have raised concerns at the FMC about non-Chinese carriers' ability to compete in the China-USA trade.

Negotiations between representatives of the US and Chinese governments on these issues have not settled the matter. It does not appear the FMC is ready to take drastic action in this matter at this time, but the Commission does have the authority to impose countervailing sanctions against Chinese flag carriers of US$ 1.1 million per US port call. Similar sanctions were briefly imposed against Japanese flag carriers in September 1997 (Docket 96-20), but were later reduced under a negotiated settlement.

A related proceeding, Docket 99-05, which investigated service contract practices of the Asia North America Rate Agreement (ANERA), has also been discontinued. ANERA suspended its collective rate making and contracting operations in May 1999, however, it vigorously defended itself in these proceedings. In remarks published in the New York "Journal of Commerce," ANERA's attorney, Stanley Sher said "The Commission's decision fully vindicated the carriers." In its summary remarks on these matters, the FMC said it did not obtain sufficient evidence from shippers and NVOCCs to proceed further. Evidence collected during the investigation could be used by the FMC's in other proceedings.

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The information contained herein is obtained from reliable sources. It is subject to change at any time, however, depending on changes in laws and regulations. While we continually attempt to monitor this information, we do not guarantee its accuracy and are not responsible for any damages suffered by any party in reliance on it.