October 5, 2001 Volume 5, Number 11 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.

OSRA Impact Study Released:    Includes FMC’s Suggestions for New Legislation & Regulation

The Federal Maritime Commission (FMC) has issued a comprehensive report on its two-year study on the regulatory and economic impact of the Ocean Shipping Reform Act of 1998 (OSRA). The study assesses the ocean shipping industry's operations during the first two years of implementation under OSRA. In preparing the study, the Commission relied upon a broad range of sources, including the cross section of industry views provided in response to the Notice of Inquiry and survey on OSRA's impact conducted earlier this year.

The main focus of the study is an examination of 5 key issues: service contract developments, agreement and voluntary service contract guideline activities, ocean transportation intermediary (OTI) licensing and bonding, tariff publication, and controlled carrier issues. A general regulatory and economic overview of ocean shipping is also included. In the study's closing observations the Commission offers several suggestions to Congress for possible amendments to the Shipping Act. The most significant of these focuses on controlled carriers. The FMC suggests Congress give it "greater authority to address unjust and unreasonable rates contained in the service contracts of controlled carriers." Also, the FMC suggests that the definition of controlled carrier be expanded to include NVOCCs owned or controlled by a government.

In announcing the issuance of the study, Chairman Harold J. Creel, Jr., said "OSRA was enacted to promote a more competitive and efficient ocean liner industry by placing a greater reliance on the marketplace -- indications are that it is doing so. Carriers and shippers are tailoring service contracts to their specific market-place needs. Discussion agreements with non-binding ratemaking authority essentially have replaced traditional conferences as the primary forum for carriers to exercise their antitrust immunity with regard to pricing. And our findings regarding voluntary service contract guideline adherence by agreement carriers indicate that adherence generally depended on the overall market conditions of the particular trade examined."

Chairman Creel indicated that he particularly endorsed the study's conclusion that the Commission must continue to monitor the evolution of the industry under OSRA to ensure that it fosters a viable ocean liner industry primarily dependent on marketplace forces rather than government regulation. The study can be viewed by visiting the Commission's Internet website at www.fmc.gov and is available in several downloadable formats

FMC Investigation Prompts Action by Port Everglades:    Tug Service Monopoly Ends

In response to an investigation by the Federal Maritime Commission (FMC), Port Everglades has agreed to end the monopoly on tug services enjoyed for 43 years by Hvide Marine, and its subsidiary Seabulk International, Inc. FMC’s Fact Finding Investigation No. 24 focuses on exclusive arrangements for tug services at Florida ports that may be in violation of the Shipping Acts. This investigation was begun in June 2001, and remains on-going. During early August, hearings in this matter where held Forth Lauderdale, FL by FMC Commissioner Antony Merck. The Broward County (Florida) Commission agreed on August 21 to approve the application of Tugz International, an affiliate of Great Lakes Towing Co., to provide tug service at Port Everglades. Additional hearings in this investigation were scheduled for late September at Port Canaveral, Florida, but these have been postponed due to travel restrictions in the US following the events of Sept. 11. According to Tugz International, tug service at Port Canaveral is provided by Seabulk International under an exclusive franchise.

Carriers Publish War Risk Surcharges:    FMC Requires 30 Day Notice

Increasing vessel insurance costs have prompted many ocean carriers to publish War Risk Surcharges in their FMC tariffs. According to FMC regulations these new surcharges must be published 30 days before they become effective. Many leading carriers serving the Middle East, Indian Subcontinent, North Africa, and Eastern Mediterranean have published War Risk Surcharges. These surcharges will also apply on shipments moving under service contracts that are subject to governing tariffs, unless a specific exemption to the surcharge is included in the contract.

The Middle East Indian Subcontinent Discussion Agreement announced its members will impose a War Risk Surcharge of $150 per TEU and $300 per FEU for cargo moving to the Middle East and Pakistan, and $10 per TEU, $20 per FEU for cargo moving to India and Bangladesh. Members of this agreement include APL, CMA CGM, Maersk-Sealand, National Shipping Company of Saudi Arabia, Senator Lines, P & O Nedlloyd, and United Arab Shipping Company. The effective date of the increase varies according to the individual FMC tariffs of the Agreement members.

Due to continuing unrest in Sri Lanka carriers serving the port of Colombo recently imposed a War Risk Surcharge of US$150 per 20' container and US$300 per container of all other sizes. In the trade between the US and the Eastern Mediterranean trade, some carriers have published a War Risk Surcharge of $50 per TEU applicable on shipments to/from ports in Egypt, Lebanon, Syria, and $160 per TEU on shipments to/from Israel.

Once the War Risk Surcharges are effective they apply on all shipments moving under tariff rates and under service contracts that are governed by the carrier’s FMC tariff, except those rates and contracts that specifically provide an exemption from the surcharge. Shipments received at origin ports or inland points by Carriers prior to the effective date of the surcharge are not subject to the surcharge.

Docket 00-02:    Puerto Rico Ports Authority Found Subject to FMC Jurisdiction

In response to a motion to dismiss this proceeding, the FMC has ruled that the Puerto Rico Ports Authority (PRPA) is subject to the Shipping Act and FMC jurisdiction. This proceeding began with the filing of a complaint in January 2000 by Crowley Liner Services, Inc. (Crowley) and Trailer Bridge, Inc. (Trailer Bridge) that alleged the Puerto Rico Ports Authority (PRPA) assessed unfair dockage and other fees at the port of San Juan. Crowley and Trailer Bridge alleged that PRPA changed its method of measuring vessels that pay dockage and other fees at San Juan, and by doing so, tripled their dockage and other charges. This resulted in charges that are double those of other carriers that compete with Crowley and Trailer Bridge at San Juan.

The PRPA argued that FMC did not have jurisdiction over the case, because it is a carrier subject to the jurisdiction of the Surface Transportation Board (STB), and because its actions complied with US Coast Guard requirements. According to an order issued by FMC Administrative Judge Norman D. Kline on September 24, 2001 the PRPA is a marine terminal operator, and not a carrier, and as such the FMC has jurisdiction over the complaints filed Crowley and Trailer Bridge. Judge Klein also noted US Coast Guard regulations do not determine Shipping Act issues. The proceeding will move forward at the FMC, unless the parties agree to a settlement or mediation and withdraw their complaints.

Volume 5   Number 11      October 5, 2001

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