October 3, 2003 Volume 7, Number 10 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.

TSA Carriers Agree to Settlement Agreement:   $1,350,000 Paid to FMC

The Federal Maritime Commission has entered into a settlement agreement with the major ocean carrier agreements and their members who serve the inbound U.S. trades with Asia, including the Transpacific Stabilization Agreement (TSA), and two TSA-related bridging agreements. The settlement includes a payment of $1,350,000 in lieu of civil penalties. This investigation was prompted by Petition P1-02 filed in May 2002 by the National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA) and the International Association of NVOCCs. These groups claimed that TSA members violated the Shipping Acts by engaging in a concerted practice of discrimination against non-vessel operating common carriers (NVOCCs) and other illegal practices. The settlement addresses carrier practices investigated in the Commission's Fact Finding Investigation No. 25, which was headed by FMC Commissioner Joseph E. Brennan.

Under the terms of the settlement, the TSA carriers shall refrain from certain practices involving the discussion and agreement on rates and negotiation of service contract terms particularly affecting NVOCCs. These include practices alleged by the NCBFAA and IANVOCC of unequal timing of negotiations and unequal application of general rate increases and surcharges. Accordingly, the TSA carriers will:

According to FMC officials the settlement addresses issues broader than those raised by the original NVOCC petition. After reviewing a report earlier this year by the Investigative Officer in this matter, Commissioner Brennan, the Commission decided to also consider issues involving information sharing by TSA members, TSA's exercise of formidable market power through its ability to agree on rates as well as capacity, and related agreements covering the trade from Indian subcontinent to the USA. The settlement secures important structural changes in TSA by:

In announcing the settlement FMC Chairman Steven Blust said it "resolves the concerns unearthed in that Fact Finding Investigation in an efficient manner with the greatest possible benefit to the trade." The settlement also calls for semi-annual meetings between TSA and Commission representatives to review the activities of the TSA.

FMC Extends Comment Period Again for UPS & NCBFAA Petitions

The FMC has again extended the deadline for comments in reply to the petitions filed by United Parcel Service, Inc. (UPS) and by the National Customs Brokers and Forwarders Association of America (NCBFAA) Comments on Petition P3-03 and Petition P5-03 are now due by October 10, 2003. Comments may be submitted to the FMC Secretary via email: secretary@fmc.gov and should also be sent to the attorneys representing the petitioners.

In Petition P3-05 the NCBFAA has asked the 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. Granting this exemption would require the FMC to very liberally re-interpret the Shipping Act, and would significantly reduce its ability to protect the public from violations of Section 10 of the Act. Approximately 3,000 NVOCCs serving the USA are currently subject to the Sections 8 and 10 of the Shipping Act.

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 for ocean transportation of cargo. UPS is registered with the FMC as a Non-Vessel Operating Common Carrier (NVOCC), and as such it is not permitted to offer service contracts to its shipper clients. A similar petition has also been filed with the FMC by C.H. Robinson Worldwide, Inc. – Petition P9-03 Both these petitions ask the FMC to make individual exemptions, not rulemakings. Comments on the C.H. Robinson petition are also due on October 10, 2003.

Two NVOCCs Petition FMC for Rulemakings on Service Contract Authority

Bax Global Inc. has petitioned the Federal Maritime Commission for a rulemaking to amend the Commission’s regulations to permit it and other similarly situated NVOCCs to enter into confidential service contracts as an "ocean common carriers" with their shipper-clients for the ocean transportation of cargo. Ocean World Lines, Inc. has petitioned for a rulemaking that would expand the definition and scope of the term "special contracts" to include NVOCCs in the same manner as currently applied to ocean freight forwarders. Both these petitions do not seek individual exemptions from the Shipping Act, instead, both ask the FMC to institute rule making proceedings.

Bax Global is a large NVOCC based in Southern California. Its Petition P8-03 is similar to the UPS petition in that it requests service contract authority for an NVOCC, but it goes further; Bax Global proposes the FMC establish criteria for determining which entities should be authorized to enter confidential service contracts. Proposed entities should have:

Ocean World Lines Inc. is a large NVOCC based in New York. Its Petition P7-03 seeks to "provide NVOCCs with the ability to enter into rate agreements that are shielded from public view by their competitors without recourse to service contracts or a broad-ranging tariff exemption and to ameliorate the marketplace dysfunction caused by the transparent/opaque rate dichotomy that exists in the trade today."

Comments on both Petitions may be submitted to the FMC Secretary via email: secretary@fmc.gov and should also be sent to the attorneys representing the petitioners. Copies of these petitions are available from the FMC Secretary at the FMC web site www.fmc.gov The deadline for comments is October 10, 2003.

Volume 7   Number 10      October, 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.