January 08, 2003 Volume 7, 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.

FMC Outlook for 2003: Pending Dockets, Petitions and Investigations

As it moves forward into 2003 the Federal Maritime Commission (FMC) has more than enough pending dockets, petitions and investigations to keep its staff busy. Here is a brief review of the ones we think our readers will find interesting:

Transpacific Trades: Sometime in 2003 the FMC will decide how to proceed with its formal Investigation into allegations that ocean carrier members of the Transpacific Stabilization Agreement (TSA) violated the Shipping Act during the spring 2002 service contracting season. This investigation is headed by Commissioner Joseph E. Brennan, who held hearings at US West Coast Ports during November to take testimony under oath and receive documents in evidence. The Commission also issued Section 15 Orders to each of the TSA carriers which required detailed information on the negotiation of service contracts for the 2002-2003 season, and the implementation of general rate increases (GRI) and peak season surcharges (PSS). The Commission must use this information to decide if the TSA’s practices warrant further action. This investigation was prompted by Petition P1-02 filed in May 2002 by the National Customs Brokers and Forwarders Association of America, Inc. and the International Association of NVOCCs, Inc. These groups claimed that TSA members violated the Shipping Acts by engaging in a concerted practice of discrimination against NVOCCs.

Chinese Issues: For the fifth year in a row the Commission will continue work on Docket 98-14, its on going inquiry into rules and regulations of the Government of the People's Republic of China which may have an adverse impact on shippers, forwarders and carriers serving the trade between the U.S. and China. In December the Commissioners reviewed this matter for the ninth time in a session closed to the public. In these sessions the FMC reviews detailed information gathered from ocean carriers and other parties serving the trade. During the term of this investigation new Chinese shipping laws and regulations have impacted the trade, and these are being closed studied by the FMC. In 2002 the Chinese Ministry of Communications implemented new licensing regulations for ocean forwarders and NVOCCs, but it did not implement proposed tariff filing regulations. If the FMC rules that the Chinese government or Chinese Carriers have created conditions unfavorable to the trade that adversely affect the foreign commerce of the US, then it could take actions similar to those it enforced against Japanese container operators in 1997. The FMC has the authority to limit sailings, suspend tariffs, suspend agreements, and impose fines of up to $1,000,000 per voyage. The political ramifications of these actions make them unlikely, but Docket 98-14 will remain an important issue.

Caribbean Trades: The Commission is still considering a petition submitted by the South Florida NVOCC-NAOCC Association in September 2002 requesting an investigation of allegedly unlawful activities by the members of the Caribbean Shipping Owners Association (CSA). The Florida NVOCCs formally asked the FMC to determine whether CSA's members violated the Shipping Act through discriminatory service contracting and rating practices in the Caribbean trades that intentionally discriminate against NVOCCs. Petition P2-02 contends that these practices reduce competition in the Caribbean trades, and produce unreasonable reductions in transportation service and unreasonable increases in transportation cost to NVOCCs and the shipping public. The FMC was also asked to consider allegations that the CSA and its members may be in violation of the Shipping Act by either adopting mandatory agreements relating to NVOCC rates and services, or failing to file true copies of their voluntary guidelines thereon with the Commission.

Terminal Operations: Petition P3-02 submitted by the Association of Bi-State Motor Carriers, Inc. asks the FMC to investigate and determine whether the truck detention practices and tariff regulations of the members of the New York Terminal Conference (NYTC) constitute unjust and unreasonable practices and regulations in violation of the Shipping Act. The NYTC is not simply a ocean terminal operator - it is an agreement of three leading terminals operated under the authority of an FMC agreement. The deadline for public comment on this Petition was December 20^th.

The Canaveral (Florida) Port Authority is the focus of Docket Nos. 02-02 and 02-03. In these two related proceedings the FMC must determine whether the exclusive tug arrangements of the Canaveral Port with Seabulk International violate the Shipping Act. Additionally, the Commission has required the Canaveral Port to show cause why its refusal to consider a pending application by another tug operator does not constitute a refusal to deal or negotiate within the meaning of the Shipping Act. An FMC investigation into Exclusive Tug Arrangements in Florida Ports in 2001 helped persuade Port Everglades to end a 43 year old monopoly on tug services at its port.

Enforcement Activity: In March 2002 the Commission found Sea-Land Service, Inc. liable for hundreds of violations of the Shipping Act, but this docket remains unresolved. According to Docket 98-06 between 1996 and 1998 Sea-Land violated the Shipping Act on 149 shipments by deliberately undercharging selected NVOCCs based in the Los Angeles area for shipments to the Far East. Sea-Land was also found liable for violations on over 400 shipments by paying compensation to forwarders who did not perform forwarding services, and on 170 of these shipments the forwarder also had a beneficial interest in the shipment.. In a preliminary ruling FMC’s Administrative Law Judge wrote that Sea-Land "recklessly disregarded" the Shipping Act. The penalties in this case could be in the millions of dollars.

New US Customs Regulations Impact NVOCCs in the US Import Trades

New US Customs advance manifest filing regulations have generated many questions from our NVOCC clients. It is difficult for us to respond because these regulations are issued by US Customs, not the US Federal Maritime Commission (FMC). Our expertise here at DPI is limited to FMC regulations, but we can provide the following:

1. Filing: the new US Customs regulations will require NVOCCs serving the USA to provide details of actual shipper/consignee and a precise commodity description for each bill of lading issued. This applies only on US Imports. The deadline for these filings to begin is 31Jan2003. There are two options available to satisfy this new regulation:

a. An NVOCC can simply provide the required information to its ocean carrier or master co-loader, who will in turn file it with US Customs. In this case, however, additional documentation fees and earlier cut-off times may apply, and the NVOCC must reveal the full details of its shipper and consignee clients to its carrier or master co-loader.

b. On the other hand, by filing direct with the US Customs Automated Manifest System (AMS) prior to delivery of cargo at the loading port an NVOCC can avoid additional fees, and keep its customer info more secure.

2. Bonding: We can confirm the NVOCC bond required by the US Federal Maritime Commission (FMC) can NOT also be used to satisfy the US Customs new $50,000 bonding requirement for NVOCCs filing direct to AMS. If an NVOCC plans to file directly to the US Customs AMS System, then it must obtain a separate "International Carrier (IC) Bond."

3. SCAC: All carriers that file directly to the US Customs AMS system must obtain a Standard Carrier Alpha Code (SCAC) from the National Motor Freight Traffic Association of the USA. Visit www.nmfta.org for details.

4. Commodity Descriptions: The "precise" description required by US Customs is satisfied when the US Harmonized Tariff System (HTS) for commodity descriptions is used. The US International Trade Commission is the official source of the HTS, and its database is accessible at http://www.usitc.gov/ The Federal Maritime Commission (FMC) also encourages the use of HTS item numbers and descriptions in tariffs, however, unlike US Customs, the FMC does not prohibit the use of generalized commodity descriptions such as Cargo, NOS, Freight All Kinds (FAK), Foodstuffs, or Footwear. These are still acceptable for filing in FMC tariffs, but will no longer be accepted by US Customs.

Volume 7   Number 1      January, 2003

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.