March 3, 2006 Volume 10, Number 3 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 Reduces Penalty: Sea-Land Service Ordered to Pay $820,000

The Federal Maritime Commission announced Feb. 8, 2006 its decision to reduce Sea-Land Service's penalty for Shipping Act violations from $4,082,500 to $820,000. Before this reduction Sea-Land's penalty was the highest FMC penalty to date. In January 2003 the FMC's Administrative Law Judge Frederick M. Dolan, Jr. ruled in the Initial Decision of Docket 98-06 that egregious violations of the Shipping Act by Sea-Land warranted the high penalty. According to Docket 98-06 Sea-Land was found in violation of the Shipping Act on 149 shipments for deliberately undercharging selected Non-Vessel Cargo Carriers (NVOCCs) based in the Los Angeles area for shipments to the Far East. These shipments were made in 1996, 1997 and 1998, before Sea-Land's international services were acquired by the A.P. Moller Group. Judge Dolan assessed the maximum civil penalty for each shipment to reach the $4,082,500 penalty amount. In comments made with this ruling Judge Dolan wrote that "Sea-Land's attitude clearly demonstrated that it willfully and knowingly violated (the Shipping Act) by being plainly indifferent to the requirements of the statute and disregarding its strict requirements." With regard to the penalty amount, Judge Dolan wrote "it is important for deterrent purposes to send a strong signal to the industry."

Sea-Land filed exceptions to Judge Dolan's Initial Decision on March 24, 2003. FMC Commissioners ruled by majority on Feb. 8, 2006 to lower the penalty amount as well as strike some contested statements from the hearings record, but ruled not to grant Sea-Land's request to present oral arguments. FMC Commissioners found that Judge Dolan's ruling did not take into full consideration the Ocean Shipping Reform Act of 1998 (OSRA) which made confidential service contracts between carriers and NVOCCs legal. Sea-Land's violations occurred before OSRA went into effect in May of 1999. However, the Commission, citing penalties role as a deterrent to future unlawful violations, found that with the passage of OSRA, Sea-Land's actions would not be considered violations today and accordingly a penalty is not needed to act as deterrent to the actions.

FMC Commissioner Joseph Brennan wrote dissenting comments in opposition of the decision and in favor of hearing oral arguments. Brennan wrote, Sea-Land "was essentially thumbing its nose at the Commission and the federal laws under which the Commission operates." He further stated "Today's order, which fines Sea-Land a mere $220,000 more than Sea-Land's suggested maximum fine of $500,000 - $600,000, will likely represent just…a mere cost of doing business." Brennan stressed "the Commission needs to show that real consequences will follow from intentional and knowing violations of the Shipping Act of 1984."

TSA Carriers Reduce Bunker Surcharge: Effective April 1, 2006

The carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane have amended their FMC tariffs to provide for reductions to Bunker Adjustment Factors (BAF), effective April 1 to April 30, 2006. As of May 1, 2006, TSA will announce BAF surcharges monthly, instead of quarterly, in order to respond quickly to changes in fuel prices. Details of BAF effective April 1 are as follows: US$ 410/PC20, US$ 545/PC40, US$ 615/PC40 hi-cube, US$ 690/PC45 and US$ 12/WM.

Inland Fuel Charges (IFC) will also be reduced from April 1 to April 30, 2006 to US$ 169 per container for mini-land bridge and inland point intermodal shipments moving via rail, and US$ 49 per container for local and regional "Group 4" truck transport within California, Oregon and Washington, and for East Coast local store-door truck moves. The current Currency Adjustment Factor (CAF) of 3 percent for shipments from Japan will remain in effect thru June 30, 2006.

TSA member carriers are American President Lines, COSCO Container Lines Ltd., Evergreen Marine Corp., Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, "K" Line, Mitsui O.S.K. Lines, NYK Line, OOCL and Yang Ming Marine. Additional information on surcharges applied by the TSA Carriers is available at http://www.tsacarriers.org.

WTSA Adjusts Currency Factors, Increases Bunker and Inland Fuel Surcharges

The members of the Westbound Transpacific Stabilization Agreement (WTSA), who serve the trade from the USA to East Asia, have amended their FMC tariffs to reduce Bunker Adjustment Factors (BAF) and Currency Adjustment Factors (CAF). New BAF surcharges will be effective for the month of April 2006. As of May 1, 2006 WTSA will announce BAF surcharges monthly, instead of quarterly, in order to respond quickly to changes in fuel prices. Amendments to CAF will be effective April 1 to June 30, 2006.

	Bunker (BAF) April 1 - April 30, 2006	Currency (CAF) April 1 - June 30, 2006
	US$ 436 per 20' container	Japan 42% (decrease from 47%)
	US$ 545 per 40'/45' container	Korea 0% (no change)
	US$ 28 per WM	Taiwan 4% (decrease from 5%)
		Singapore 10% (no change)

Inland Fuel Charges (IFC) will also be reduced for the month of April 2006 to US$ 169 per container for rail, intermodal rail/truck and US$ 49 per container for local/regional truck. The 11 members of WTSA are American President Lines, China Shipping Container Lines, COSCO Container Lines, Evergreen Marine Corp., Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, "K" Line, NYK Line, OOCL and Yang Ming Marine. For more information visit www.wtsacarriers.org.

TACA Conference Increases Surcharges, Maintains Current Bunker Surcharge

The Trans-Atlantic Conference Agreement (TACA), whose member carriers serve the trade between the USA and North Europe, United Kingdom and Ireland, Scandinavia and Baltic Ports, have recently announced an increase in their Currency Adjustment Factor (CAF). The CAF will be raised from the current 4 percent to 6 percent as of March 16, 2006 and be effective until at least April 15, 2006. TACA will maintain its current Bunker surcharge (BAF) as follows:

	Effective March 16 - April 15, 2006
	Atlantic/Gulf Coast Ports	Pacific Coast Ports
	US$ 423 per 20ft container	US$ 635 per 20ft container
	US$ 846 per 40/45ft container	US$ 1270 per 40/45ft container
	US$ 42 per WM	US$ 64 per WM

TACA has made no changes to the BAF surcharge since Oct. 16, 2005. TACA surcharges for the period of April 16 to May 15, 2006 will be announced by March 15.

The TACA Carriers will implement another General Rate Increase (GRI) effective on April 1, 2006. This GRI for Eastbound and Westbound, dry and temperature controlled containers will be US$ 240/20' and US$ 300/40'. Additional GRIs will be implemented July 1 and Sept. 1 as part of TACA's Tariff Business Plan for 2006. TACA members are Atlantic Container Line, Maersk Line, Mediterranean Shipping Co., NYK Line and OOCL. Revisions to surcharges for transportation services are published in TACA's relevant FMC tariffs and on its website: www.tacaconf.com.