July 10, 2000 Volume 4, Number 6 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:

• OSRA Interim Status Report Released
• FMC Announces Four Management Appointments
• FMC Obtains Injunction Against World Line Shipping

OSRA Interim Status Report Released   FMC Report Provides Data, No Conclusions.

The Federal Maritime Commission has issued an interim status report that discusses the first year of operations under the Ocean Shipping Reform Act of 1998 ("OSRA"). The purpose of the report is to explain how the industry has been adapting to the statutory and regulatory changes brought about by OSRA. It generally describes recent trends in liner shipping, with an emphasis on trade volumes in the major US container trades. It highlights OSRA's most prominent provisions, and furnishes information on service contracting, carrier agreements, tariff publishing, and the activities of ocean transportation intermediaries (OTIs). The report draws few conclusions, but does provide statistics that will prove useful in the future. Here are some of the notable statistics:

Agreements: As of May 2000 there were 271 carrier agreements on file at the FMC, including 140 vessel sharing agreements and 22 conference agreements. In May 1999 there were 32 conferences on file.

Ocean Transportation Intermediaries (Freight Forwarders and NVOCCs) : while the OSRA regulations introduced new licensing requirements for OTI-NVOCCs, the total number of NVOCCs on file with the FMC has remained almost unchanged. As May 2000 the FMC records show 1750 Licensed OTI-Ocean Freight Forwarders, 1300 Licensed OTI-NVOCCs (operating in the USA), 600 Unlicensed OTI-NVOCCs (operating outside the USA), and 525 Licensed OTI-NF (both Ocean Freight Forwarder and NVOCC).

OTI Bonding: The increased financial responsibility (bonding) requirements for OTIs has certainly made an impact on the industry. As of May 2000 "total consumer protection" provided by surety bonds on file with the FMC is $378 million, vs. $215 million in May 1999. There are about 75 surety companies underwriting FMC bonds, however, the top five sureties write about 75 percent of all bonds on file.

Service Contracts: In the first year of OSRA there were 46,035 new service contracts and 95,627 service contract amendments filed with the FMC. This is an increase of more than 124% over the previous year. Most of the discussion in the report is based on "snapshot" analysis of 408 contracts filed by 13 large carriers. The FMC found the terms and conditions of most contracts it reviewed varied little from contracts filed prior to the implementation of OSRA. Most of the contracts were between a single shipper and carrier, had a duration of 12 months or less, a volume commitment of 100 TEUS or more, and were limited to a single trade lane. In a separate study, the FMC examined a sampling of 550 service contracts and found the signatories were 75% cargo owners, 20% NVOCCs, 5% Shippers Associations.

Tariffs: The OSRA report does not include statistical information on tariffs published in compliance with FMC regulations. FMC audits of tariff systems are on going. The Commission recently began a rule making proceeding (Docket No. 00-07) to obtain public comments to address the reasonableness of tariff access charges.

In announcing the report Commission Chairman Harold J. Creel, Jr., said: " While our status report recognizes that it is too early to draw definitive, long-term conclusions, it does provide preliminary views on the short-term effects OSRA has had on U.S. ocean shipping." The FMC is preparing a more comprehensive report, which will cover two years' experience under OSRA. That report will be issued in the summer of 2001. The 42 page OSRA Interim Status Report can be viewed by visiting the Commission's Internet website at www.fmc.gov.

FMC Announces Four Management Appointments:    New Directors for Key Offices

On June 8, 2000 FMC Chairman Harold J. Creel, Jr., announced the appointment of four Commission employees to management positions. These appointments resulted from the FMC's reorganization earlier this year. Three of the four appointments are within the FMC Bureau of Trade Analysis. The appointees are as follows:

Frank J. Schwarz has assumed the position of Deputy Director of the Bureau of Trade Analysis. This Bureau maintains responsibilities for the review of agreements, assessing competitive trade conditions, and the substantive analysis of service contracts and tariffs. (tel: 202-523-5796, fax: 202-523-4372)

Mamie H. Black has been selected as the Director of the Office of Service Contracts & Tariffs, within the Bureau of Trade Analysis. This office reviews and analyzes service contracts, assesses carrier tariffs for accessibility and accuracy, and addresses issues and inquiries in these areas. (tel: 202-523-5856, fax: 202-523-5830)

Karen V. Gregory has been appointed as the Director of the Office of Economics & Competition Analysis. Also within the Bureau of Trade Analysis, this office is responsible for the economic analysis of filed agreements and assessing competitive conditions in U.S. ocean commerce. (tel: 202-523-5845, fax: 202-523-4372)

Anne E. Trotter was chosen as Director of the Office of Passenger Vessels & Information Processing. This office, within the Bureau of Consumer Complaints & Licensing (BCCL), is responsible for the passenger vessel program, certain OTI activities, and maintaining several databases. (tel: 202-523-5818, fax: 202-523-5830).

FMC Obtains Injunction Against World Line Shipping   Docket Nos. 98-19 and 00-05

What happens to an NVOCC when its continues to operate after its FMC license, bond and tariff are cancelled? Can the FMC really shut down an unlicensed operator? In a recent case in Los Angeles the FMC demonstrated its ability to use the Federal Courts to act against an unlicensed NVOCC who continues to operate.

In Docket No. 98-19, issued in December 1999, the FMC found that World Line Shipping, Inc. and its owner, Saeid B. Maralan (AKA Sam Bustani) violated the Shipping Act and imposed $100,000 in civil penalties. The Commission ordered Bustani to cease and desist from operating as an NVOCC without a tariff and bond.

In April 2000, the FMC became aware of on-going shipping activity by Bustani, operating under various unlicensed fictitious business names. This prompted the Commission to begin a new proceeding, Docket 00-05, which led to the Federal Court action. On June 12, 2000, the U.S. District Court for the Central District of California granted the FMC's request for a preliminary injunction against World Line Shipping, Inc., and its owner. The injunction prohibits Bustani from operating as an NVOCC without a license, bond, or public tariff. Violation of the injunction could lead to Bustani being held in civil contempt by the court.

FMC Chairman Harold J. Creel was pleased by the court's ruling. "We are committed to ensuring that shippers can safely rely on companies providing ocean transportation services," he said. "Consumers have a right to expect such entities to be licensed and bonded in accordance with statutes passed by Congress. We will vigorously pursue unscrupulous operators and recidivists, in both FMC proceedings and, when necessary, in federal court."

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