September 4, 2003 Volume 7, Number 9 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.

Paul Anderson Joins the Commission:   Full House at the FMC Once Again

On August 22, 2003 during the Congressional summer holidays President Bush announced the recess appointment of A. Paul Anderson of Florida to be a Federal Maritime Commissioner. Mr. Anderson’s appointment has not yet been confirmed by the US Senate, however, has taken his seat on the Commission. Before the end of this year the Senate will most likely confirm this appointment for the remainder of a 5-year term expiring June 30, 2007. Mr. Anderson replaces former Commissioner Delmond J.H. Won of Hawaii, who served on the FMC for nine years.

This is the third appointment to the FMC made by President Bush; the current FMC Chairman, Steven Blust of Tampa, Florida, was confirmed in August 2002, and Commissioner Rebecca Dye of North Carolina was confirmed in November 2002. Two Commissioners appointed by President Clinton continue to serve: former Chairman Hal Creel of South Carolina, and Joseph Brennan, the former Governor of Maine. The Commission now has a full house of five Commissioners: three Republicans appointed by President Bush, and the two Democratic Clinton appointees.

Mr. Anderson brings extensive experience in maritime matters and government operations to the FMC. He served as Vice President for Government Relations at JM Family Enterprises, Inc., whose subsidiary, Southeast Toyota Distributors (SET), is the world's largest independent distributor of Toyota vehicles. Mr. Anderson has also worked in an executive capacity for Hvide Marine, which has since changed its name to Seabulk International, Inc. and served as Special Assistant to U.S. Senator Paula Hawkins. Until recently, he served as Chairman of the Board of Trustees of Broward Community College, Florida. Mr. Anderson graduated from the University of Florida in 1982, and is a 1997 graduate of the Program for Senior Managers in Government, Harvard University, John F. Kennedy School of Government.

Chinese Carriers Modify Petitions for Exemption from FMC Tariff Regulations

Sinotrans Container Lines Co., Ltd. and China Shipping Container Lines Co., Ltd. have withdrawn their petitions for limited exemption from the tariff publishing requirements of Section 9 of the Shipping Act and filed new petitions seeking permanent full exemptions. Both of these Chinese flag carriers have asked the Federal Maritime Commission to allow them to lawfully publish rate decreases without regard to whether these are the same as or lower than competing carriers’ rates, and without waiting for 30 days. These carriers are classified by the Shipping Act as controlled carriers because their operating assets are government controlled. Section 9 of the Shipping Act subjects controlled carriers to more stringent tariff regulations, which are enforced by the FMC. The current Sinotrans request is Petition No. P6-03. China Shipping’s request is designated as Petition No. P4-03

The timing of these petitions was likely determined by the new bilateral maritime agreement signed on July 31^st by the Maritime Administration (MARAD) of the U.S. Department of Transportation and representatives of China’s Ministry of Communications, Department of Water Transport. MARAD has been seeking to remove a number of restrictions and financial obligations the Chinese government has imposed on ocean carriers, NVOCCs and shipping agents; restrictions that do not exist in other countries. China adopted a new law governing International Maritime Transportation in January 2002, and it has implemented many new maritime regulations since then. The full text of the new agreement has not yet been released, but MARAD has made some of the correspondence available at www.marad.dot.gov/programs

FMC Extends Comment Period on UPS Petition for Service Contract Authority

The FMC has extended the deadline for comments in reply to the petition filed in late July by United Parcel Service, Inc. (UPS). Comments on Petition P3-03 are now due by 24Sep2003. In Petition P3-03 UPS has asked the Federal Maritime Commission, pursuant to Section 16 of the Shipping Act, for an exemption from the Shipping Act to permit it to negotiate, enter into and perform service contracts. UPS is registered with the FMC as a Non-Vessel Operating Common Carrier (NVOCC). Under the Shipping Act and FMC regulations NVOCCs may enter into service contracts with ocean carriers to purchase transportation services, but are not permitted to offer similar contracts to their shipper clients. Only vessel operating common carriers (VOCCs) are granted that option. UPS has asked the Commission to make an exception, and to re-write the Shipping Act to create a new entity that would enjoy what it calls "back-to-back service contracting" – in other words, an NVOCC that purchases transportation from VOCCs via service contracts, and then re-sells this transportation to its clients using service contracts. Comments on Petition P3-03 should be directed to the FMC Secretary by 24Sep2003, and should also be sent to the attorney representing UPS, Holland & Knight LLP. Copies of the petition are available via email: secretary@fmc.gov

NCBFAA Petitions FMC for Exemption from Tariff Requirements

The National Customs Brokers and Forwarders Association of America (NCBFAA) has petitioned the Federal Maritime Commission (FMC) for exemption from the provisions of Section 8 and 10 of the Shipping Act of 1984, which require non-vessel ocean common carriers (NVOCCs) to establish, publish, maintain and enforce tariffs setting forth ocean freight rates. Alternatively, the NCBFAA requests that the Commission consider a more limited exemption and rulemaking that would allow NVOCCs to establish "range rates." Like the UPS Petition, nothing in recent history suggests the FMC would be willing to grant an exemption of this magnitude. Granting the Petition P5-03outright would require the Commission institute rule makings which would liberally re-interpret the Shipping Act, and would drastically reduce its ability to protect the public from violations of Section 10 of the Act. Comments on Petition P5-03 should be directed to the FMC Secretary by 24Sep2003, and should also be sent to the attorney representing the NCBFAA, Galland Kharasch Greenberg Fellman & Swirsky, P.C. Copies of the petition are available via email: secretary@fmc.gov

Docket No. 03-07:   Possible Shipping Act Violations by FSL International & Full Service Logistics

Docket 03-07has been instituted by the FMC to determine if FSL International, Inc., Full Service Logistics, Inc., and the principals of these firms violated the Shipping Act. These two closely related NVOCCs are based in Los Angeles. Evidence obtained by the Bureau of Enforcement indicated FSL International knowingly misdeclared measurements of shipments moving under service contracts with Mitsui OSK Lines and Hyundai Marine. Additionally, FSL International is also alleged to have failed to published an accurate tariff for certain shipments. To avoid potential penalties FSL International surrendered its FMC-OTI license and closed its offices in Feburary 2003. However, the FMC later learned that FSL International continued to operate as an NVOCC, and was supported in this by Full Service Logistics, Inc.

As evidence, FMC notes a service contract between FSL International and NYK Line was amended to name Full Service Logistics as shipper. Additionally, Full Service Logistics now stands accused of having made false statements on its application for a license as an Ocean Transportation Intermediary (OTI), because it did not disclose its arrangement with FSL International to share office space or expenses. Furthermore, Docket 03-07 alleges that rates and charges assessed by Full Service Logistics differ substantially from those filed in its tariff. An investigation and a hearing before FMC’s Administrative Law Judge have been ordered. In the event violations of the Shipping Act are found, and this matter is not settled by a compromise agreement, this proceeding will determine if penalties should be assessed, and the amount thereof, and if the license of Full Service Logistics should be suspended or revoked.

Volume 7   Number 9      September, 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.