April 3, 2009 Volume 13, Number 4 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.

The United States Court of Appeals for the Ninth Circuit ruled in favor of a preliminary injunction of the Clean Truck Programs at the Ports of Los Angeles and Long Beach.  The Court reversed the decision of the U.S. District Court of Los Angeles and ordered the lower court to issue a preliminary injunction against “unconstitutional provisions” of the Clean Truck Programs.  This injunction is expected shortly after a hearing scheduled for April 27, 2009 and could require the ports to suspend collection of Clean Truck Fees and make other changes to the programs. The ports’ Clean Truck Programs aim to reduce air pollution in and around the ports by progressively banning older trucks from the ports.  The programs’ Clean Truck Fees of $35 per 20’ and $70 per 40’ container were implemented Feb 18, 2009 after several delays.

Justices on the U.S. Court of Appeals unanimously agreed that the district court “abused its discretion” when it rejected the American Trucking Association request for a preliminary injunction that would have prevented the Clean Truck Programs from taking effect.  The ninth circuit found that the district court legally erred by failing to examine the specific concession agreements provisions, many of which the court believes are preempted by federal law and are unconstitutional.  In addition to the ban on old trucks and the Clean Truck Fee, the Port of Los Angeles’ Clean Truck Program also requires truckers doing business at the port to apply for concession agreements that require numerous operational requirements, including exclusive use of employee drivers.  In its decision, the court said “motor carriers should not be required to adhere to the various unconstitutional provision in the Ports’ agreements, and are likely to suffer irrevocably if forced to do that or give up their business.”  The appeals court also noted that only the federal government can issue rules relating to motor carrier rates, routes and services.

The decision of the U.S. Court of Appeals is a victory for the American Trucking Association (ATA), whose legal counsel argued that certain provisions of the Clean Truck Programs would unlawfully re-regulate the port trucking industry to the detriment of motor carriers, shippers, businesses and consumers.  In her December 2008 decision, U.S. District Court of Los Angeles Justice Christina Snyder found that the programs’ public health benefits outweighed the economic hardships truckers may experience and denied the ATA’s request.  Justice Snyder is now scheduled to hear oral arguments from the ATA and the Ports again on April 27, 2009.   The Federal Maritime Commission is keenly interested in the decisions of both courts because it filed for a permanent injunction against “anti-competitive” aspects of the Clean Truck Programs in the U.S. District Court for the District of Columbia in Oct 2008.  A ruling in the FMC’s case is expected later this year. 

In a related development, the Port of Long Beach Board of Harbor Commissioners preliminarily approved a proposal to broaden Clean Truck Fee exemptions at its port.  Long Beach wants to encourage port truckers to switch to clean trucks – especially trucks that run on alternative fuels like liquefied natural gas (LNG).  If this proposal is approved clean trucks bought without port assistance and LNG-fueled trucks purchased with port assistance will be 100 percent exempt from the Clean Truck Fee.  A final vote on the proposal is scheduled for the Harbor Commissions’ upcoming April 6 meeting.

The Federal Maritime Commission dismissed a complaint filed by Verucci Motorcycles, LLC against Senator International Ocean, LLC, an NVOCC based in Miami, Florida.  Verucci Motorcycles, an importer of scooters and motorcycles form China, complained to the FMC in 2006 that Senator International violated the Shipping Act of 1984.  Verucci was unable to substantiate any of its allegations. FMC Law Judge Paul B. Lang dismissed all allegations in Docket 06-05 against Senator International and this decision has become administratively final.

The carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane announced a new Bunker Adjustment Factor (BAF) formula and a plan to return to quarterly adjustments. The new formula will provide for separate West Coast and East Coast BAF based on average bunker fuel prices at Hong Kong, Los Angeles and New York.  The TSA Carriers plan to begin using this formula for new service contracts effective as of May 1, 2009 or thereafter, with quarterly adjustments starting July 1, 2009.

Current 2008-09 service contracts that extend beyond May 1, 2009 and cargo moving under tariff rates are still subject to BAF calculated using TSA’s old monthly calculation formula. FMC tariffs of the group’s members indicate BAF for May 2009 at the same old formula levels that were effective in March and April 2009, viz:  US$ 328 per 20ft container, US$ 410 per 40ft container, US$ 461 per 40ft hi-cube container, US$ 519 per 45ft container, and US$ 9 per WM (LCL).

As of April 1 several of the individual FMC tariffs of the TSA member carriers did not yet reflect the new formula BAF levels -  they continue to list the old BAF formula levels.  However, the tariff of NYK Line shows the new formula BAF applies as of April 1 only on shipments moving under contracts that specifically provide for these charges, viz:  Via West Coast Service:  US$ 118 per 20ft container, US$ 148 per 40ft container, US$ 167 per 40ft hi-cube container, US$ 187 per 45ft container;  Via East Coast Service:  US$ 247 per 20ft container, US$ 309 per 40ft container, US$ 348 per 40ft hi-cube container, US$ 391 per 45ft container.  These new formula BAF levels were also filed by OOCL in its FMC tariff to apply as of March 31, 2009 on shipments moving under new service contracts effective on or after March 19, 2009.  

According to TSA Carrier Chairman Ron Widdows, the new BAF formula will enable “carriers to fully and fairly recover costs, and provide shippers with greater pricing predictability in planning their shipments.”  The TSA Carriers abandoned quarterly BAF adjustments back in May 2006 in response to fuel price volatility, but say they will return to quarterly adjustments in response to customer’s desires to maintain a greater degree of stability in freight charges.  The TSA’s 14 carrier members are American President Lines, CSCL, CMA-CGM, COSCO Container Lines, Evergreen Marine, Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, "K" Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services. The group’s web site at www.tsacarriers.org provides additional information.

The carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane announced their intentions to put an end to “non-compensatory, unsustainable rates levels” in 2009-10 service contracts.  TSA members recently met in Tokyo to discuss strategies to avoid “further erosion of the current rate structures.”  TSA Chairman Ron Widdows noted that over the past 4 – 5 months many carriers have reduced rates and engaged in behaviors that have “contributed” to rate erosion in the trade.   In response to this, TSA members have developed a two step program aimed at “stabilizing” the trade.  This two step plan consists of 1) expiration of reduced short term/spot rates by the end of June at the latest; 2) increases of $500 - $600 per 40-foot container in 2009-10 contracts for recently “deteriorated” rates.  

TSA does not have the authority to force members to implement this program, but TSA Chairman Ronald D. Widdows came out strongly for it and said, “everyone involved in this trade faces the certainty of significant losses if quick action is not taken to approach the upcoming round of contract negotiations with a renewed focus on rates that will support continued servicing of this market.” Widdows is also CEO of TSA member American President Lines.  Member line CEOs also confirmed their intentions to “seek further improvements” to the number of service contracts providing for full floating bunker and inland fuel surcharges.  TSA Executive Administrator Brian Conrad said, “This is a time for all parties to come to the table with an eye towards sharing the burden of this extraordinary market environment.”