December 4, 2003 Volume 7, Number 12 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 Collects $2,130,000 in Penalties:    8 Companies Sign Compromise Agreements

The Federal Maritime Commission announced that it has recently entered into compromise agreements which resulted in the collection of a total of $2,130,000 in civil penalties. These agreements are the result of investigations by the FMC’s Bureau of Enforcement into violations of the Shipping Acts by ocean carriers, NVOCCs, ocean forwarders, and unlicensed entities. In concluding these compromises the parties involved did not admit any violations of the Shipping Acts or FMC regulations. Details are as follows:

China Shipping Container Lines Co., Ltd, an operating common carrier based in China, was alleged to have violated the Shipping Act by permitting non-signatory shippers unlawful access to service contracts, by falsely classifying commodities by, and by failing to enforce service contract provisions relating to minimum quantity commitments and liquidated damages. Additionally, it was alleged that China Shipping entered into service contracts with NVOCCs that did not have tariffs, licenses or bonds. China Shipping paid $1,850,000 in settlement of these allegations.

Team Ocean Services, Inc., a Texas corporation operating as an NVOCC and freight forwarder, allegedly violated the Shipping Act by accessing service contracts of an unlawful foreign NVOCC by falsely identifying the shipper and consignee on the master bills of lading. Additionally, FMC alleged that Team Ocean permitted its customers to obtain transportation at rates other than those in its published tariffs. It also was alleged that Team Ocean permitted other entities to use its license, in violation of Section 19 of the Shipping Act. Team Ocean paid $100,000 to settle.

Compania Sud Americana de Vapores, (CSAV), is an ocean common carrier with headquarters in Valparaiso, Chile. It was alleged that CSAV provided transportation for certain shipments between the U.S. and the Dominican Republic not in accordance with the rates and charges set forth in its published tariff. It was also alleged that CSAV provided transportation to an unlicensed NVOCC, or entered into and operated pursuant to a carrier agreement not filed with the FMC. In settlement of these allegations CSAV paid the FMC $50,000.

Logical Logistics International, Ltd. is a licensed ocean freight forwarder with headquarters in Atlanta, GA. FMC alleged that Logical Logistics International (LLI) operated an ocean freight forwarder on the premises of a shipper in a manner contrary to FMC regulations. LLI paid FMC $50,000 in settlement of these allegations.

Patron Services, Inc. and Cap Consolidators, LLC., Patron is a licensed ocean freight forwarder and Cap Consolidators, LLC (Cap) is a licensed NVOCC. Both are located in Baltimore, MD and are related through common ownership. It was alleged that Patron violated the Shipping Act by receiving forwarder compensation on Cap shipments in which it had a beneficial interest, and that Cap violated the Act by its receipt of forwarder compensation by its related company. In settlement of these allegations Patron and Cap agreed to pay $45,000.

Airmar Cargo Services, Inc., of Miami, FL allegedly violated the Shipping Act by operating as a NVOCC without the required license, bond and tariff. It is also alleged that Airmar unlawfully accessed service contracts of other shippers. In compromise of these allegations Airmar paid FMC $20,000.

Transit Worldwide Corp., and its principal, Michael Guerrero, both of Miami, FL, are alleged to have operated as an NVOCC without the required license, bond and tariff. Under the settlement agreement reached Transit paid $15,000.

New Rules on Carrier & Marine Terminal Agreements Proposed:   FMC Docket No. 03-15

The Federal Maritime Commission has issued Docket 03-15 to give official notice of a proposed rulemaking (NPR) to amend the regulations governing agreements between ocean common carriers. This action comes in response to changes in the shipping industry since the enactment of the Ocean Shipping Reform Act of 1998, and requests by ocean carriers. The FMC investigation of the Transpacific Stabilization Agreement (TSA) and subsequent settlement agreement are quite likely to have also played key roles in this development. These agreement rules are issued in 46 CFR Part 535 and also apply to agreements between marine terminal operators, and between ocean carriers and maritime terminal operators.

Docket 03-15 and the NPR propose to make numerous changes to update and clarify the Commission's regulations governing the content of agreements subject to the Shipping Act, as well as changes to the filing requirements for meeting minutes and Information and Monitoring Reports. Proposed changes include new language designed to ensure that the Commission receives complete agreements, new language creating an exemption from the 45-day waiting period for carrier agreements that will have low market share, and language that clarifies the definitions of transshipment agreements and nonexclusive transshipment agreements.

The NPR also would modify the Information Form and Monitoring Report regulations in Part 535 to reflect changes in the amount and type of data the Commission requires. These reports are required by FMC on quarterly or annual basis to monitor the use of antitrust immunity by carrier agreements.

The Commission also plans to revise regulations concerning the filing of agreement minutes. These proposed changes will be intended to curtail the inadequate coverage of important issues and details concerning carrier discussions. The proposal will also clarify the regulations regarding meetings for which minutes must be filed, and it will create regulations regarding "effective access" to materials used or discussed in such meetings.

Concurrent with the issuance of Docket 03-15 the FMC discontinued the Docket No. 99-13, a Notice of Inquiry issued in late 1999 inviting interested parties to address eight specific issues relating to the content of agreements filed with the Commission. The complete text of Docket 03-15 is 259 pages. Comments may be submitted to the FMC Secretary or before January 30, 2004.

FMC Begins Proceedings to Revoke Licenses of 14 NVOCCs:  FMC Docket No. 03-14

The FMC has begun to proceedings to revoke the ocean transportation intermediary (OTI) licenses of fourteen US based NVOCCs who have failed to comply with the tariff publication requirements of Section 8 of the Shipping Act. The NVOCCs identified in FMC Docket No. 03-14 are each licensed and bonded, but have failed to establish or maintain an electronically published tariff and to maintain a current Form FMC-1 on file with the Commission. The Commission issued show cause orders to each of these firms which require them to respond by December 17, 2003. Absent the required responses, the licenses of these NVOCCs will be revoked, and FMC will order each of them to cease and desist from operating in the U.S.-foreign trades. The NVOCCs named in Docket No. 03-14 are as follows:

New FDA Rules on US Imports Prompt Carriers & NVOCC to Revise Tariffs

New rules issued by the US Food and Drug Administration (FDA) to implement the Bioterrorism Act of 2002 will require shippers and/or consignees to give the FDA prior notice of food imported to the USA. Failure to comply with these regulations may result in shipment delays and expenses associated with extra handling, storage or documentation requirements. This has prompted many Ocean Carriers and NVOCCs to update their tariffs to add the following rule to ensure shippers and consignees are responsible for compliance with the FDA regulations, and for any costs related thereto. For more information about the new Bioterrorism regulations visit www.fda.gov

U.S. FOOD AND DRUG ADMINISTRATION REGULATIONS

A. Prior Notice and Registration Requirements.

Pursuant to regulations effective December 12, 2003 (see 21 C.F.R. Parts 1 and 20), the FDA must be provided with notice of food that is imported or offered for import into the United States (i.e., the continental U.S., Alaska, Hawaii and Puerto Rico)by water at least eight (8) hours prior to vessel arrival. The term ‘food’ means: (i) articles used for food or drink for man or other animals; (ii) chewing gum; and (iii) and articles used for components of food or chewing gum (see 21 U.S.C. sec. 321(f)). However, the term does not include meat products, poultry products, and eggs products that are subject to the exclusive jurisdiction of the U.S. Department of Agriculture. In addition to prior notice of food shipments, the new FDA regulations require that U.S. and foreign facilities which are engaged in the manufacturing/processing, packing, or holding of food for consumption in the United States (‘subject facilities’) register with the FDA.

B. Responsibility for Prior Notice and Registration.

It shall be the responsibility of the shipper and/or consignee named in Carrier’s bill of lading (hereinafter collectively referred to as the ‘Cargo Interests’), to ensure that prior notice of any shipment of food (as that term is defined in Paragraph A) imported or offered for import into the U.S. is provided to the FDA in accordance with applicable regulations and that any subject facility (other than a subject facility of Carrier) which has manufactured, processed, packed or held such food shipment has registered with the FDA in accordance with applicable regulations.

C. Evidence of Compliance.

With respect to any food shipment for which a prior notice confirmation number (‘PN Number’) is required to be provided to the Bureau of Customs and Border Protection (‘CBP’), FDA, or any other government agency upon arrival, it shall be the responsibility of Cargo Interests to ensure that such PN Number has been provided to the required agency(ies) and other persons prior to vessel arrival. In addition, Cargo Interests shall be required to provide Carrier with the PN Number immediately upon written request of Carrier.

D. Failure to Comply.

1. In the event that any food shipment is delayed or refused entry into the United States due to the failure to provide adequate prior notice or the failure of a subject facility to register with the FDA, it is expected that notice of refusal will be provided to Carrier by the FDA and/or CBP. Carrier will use best efforts to promptly transmit the notice received from the authorities to the Cargo Interests, who shall be responsible for transmitting such notice to any other persons with an interest in the cargo. Carrier shall not be liable for any delay in the transmission of, or failure to transmit, such notice or any consequences thereof.

2. In the event that any food shipment is delayed or refused entry into the United States due to the failure to provide adequate prior notice or the failure of a subject facility (other than a subject facility of Carrier) to register with the FDA, or if it is determined that cargo which should have been refused entry has been permitted to enter the United States, then the Cargo Interests shall be jointly and severally liable to indemnify, hold harmless, and reimburse Carrier (and by booking a shipment with Carrier do thereby agree to indemnify, hold harmless and reimburse Carrier) for any and all costs, expenses, liabilities, damages, or losses incurred by the Carrier as a result of such non-compliance including, but not limited to, costs of complying with orders and directions of FDA and/or CBP, costs for handling and storing cargo, demurrage, subsequent transport of the cargo by any mode of transportation, and fines and penalties. Carrier shall have a lien on cargo in its possession for amounts due hereunder and may hold cargo until such amounts (and any other unpaid freights or charges) are paid or sell such cargo after a reasonable period. In the event Carrier is forced to take legal action to collect amounts due hereunder, or to defend any action resulting from actions or events covered by this indemnification, Carrier shall be entitled to recover all costs (including attorneys’ fees) incurred in connection with such legal action. For purposes of this paragraph, the indemnification provided to Carrier shall also extend to its agents, affiliates, contractors, employees, vessel-sharing partners, slot charterers, vessel owners, and insurers.