January 6, 2010 Volume 14, Number 1 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.

On December 24th, the U.S. Senate confirmed Michael A. Khouri as a Federal Maritime Commissioner.  Khouri brings to the Commission over 35 years of experience in the maritime industry, much of this focused on U.S. inland waterways.

Khouri, a maritime and transportation lawyer with the Louisville, Kentucky-based law firm of Pedley & Gordiner PLLC, was nominated by President Barack Obama on December 1, 2009.  Khouri started his career as a deck hand for a Paducah, KY-based river tow boat agency, Crounse Corporation, and worked his way up to captain.  After graduating law school, he joined American Commercial Lines (ACL), a river transportation specialist, as legal counsel.  He later joined MERS Economy Boat as president and chief operating officer where he had general management responsibilities for the company’s fuel and vessel supply operations on the Mississippi River and Gulf Coast. 

At his confirmation hearing Khouri outlined three areas he intends to focus on as FMC commissioner: the current global recession, regulation of controlled carriers, and preparation for future growth.  Khouri stressed that the Commission must carefully monitor rate activity and reduce non-value added cost burdens to ocean transportation intermediaries when possible.  He also noted that increased capacity of controlled carriers in some trade lanes is cause for concern.  Lastly, Khouri spoke of the FMC’s role in guiding future growth and assisting in preparation for trade volume increases. 

With the appointment of Khouri, the five-seat Commission is almost back at full-capacity.  There remains now only one empty seat on the five-member commission.  Khouri will be joining current commissioners Chairman Richard Lidinsky of Maryland, appointed by President Obama in 2009, Commissioner Joseph Brennan, a former Governor of Maine, originally appointed by President Bill Clinton in 1999, and Commissioner Rebecca Dye of North Carolina, appointed by President George W. Bush in 2002.  Khouri’s term expires June 2011.

The Federal Maritime Commission (FMC) has assigned its Docket No. 09-08 to a formal Complaint alleging the Port of Oakland gave preferential treatment to a terminal operator in violation of the Shipping Act of 1984 .  SSA Terminals, LLC filed the Complaint with the Commission on December 24, 2009.  SSA claims that the Port of Oakland recently signed a lease with Ports America that is significantly more favorable than SSA’s current lease.  According to the Complaint, SSA currently pays approximately $240,000 per acre for 151 acres, while Ports America pays only approximately $137,229 per acre for 175 acres.   SSA also claims that berths leased to Ports America are substantial more favorable than those leased to SSA.  Ports America’s berths have recently been upgraded and are located near convenient port services.  SSA claims to have already lost substantial business because of its high rent.  SSA also anticipates more losses as a result of the lower rates Ports America will be able to offer due to its more favorable rental terms.  

The Shipping Act prohibits marine terminal operators from giving any undue or unreasonable preference or advantage or imposing any undue or unreasonable prejudice or disadvantage with respect to any person.  The Shipping Act also prohibits maritime terminal operators from refusing to deal or negotiation with any person and also from enforcing unjust and unreasonable regulations and practices relating to or connected with receiving, handing, storing, or delivery property.  

SSA has asked the Commission to command the Port of Oakland to cease and desist from violating the Shipping Act, and pay SSA reparations for Shipping Act violations and lost revenues.  An initial decision in this investigation and hearing will be issued by an FMC Administrative Law Judge by December 28, 2010.  The Commission will issue a final decision no later than April 27, 2011.

The carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane announced they will maintain bunker charges for February 2010 at the same levels as January 2010, and implement an Emergency Revenue Charge (ERC) effective January 15, 2010.

February 2010 Bunker Adjustment Factors (BAF) calculated using TSA’s old monthly formula will remain at US$ 688 per 20ft ctr, US$ 860 per 40ft ctr, US$ 968 per 40ft hi-cube ctr, US$ 1089 per 45ft ctr, and US$ 19 per WM (LCL).  The “new formula” BAF for the January-March 2010 quarter is US$ 348 per 40ft ctr to US Pacific Coast Ports and US$ 689 per 40ft ctr to US Atlantic & Gulf ports, with other container sizes charged accordingly.

The TSA Carriers will implement an emergency revenue program for the first half of 2010. Member carriers have suffered an estimated collective loss of $20 billion for 2009 and are in desperate need of revenue to maintain current operating levels.  Many TSA members have implemented an Emergency Revenue Charge (ERC) of US$ 320 per 20ft ctr; US$ 400 per 40ft ctr, US$ 450 per 40ft high-cube, and US$ 505 per 45ft ctr, effective January 15, 2010.  

The ERC is an interim charge that is distinct from the previously announced 2010 general rate increase (GRI) of US$ 800 per FEU for West Coast port-to-port and local cargo, and US$ 1,000 per FEU for all other all-water and intermodal shipments. Several of the TSA Carriers have publically announced the ERC will expire upon execution of new contracts in 2010. However, their tariffs do not yet reflect any expiration date for the ERC.  “We’re looking at the ERC as a bridge to get carriers through the first half of 2010, recognizing that the current rate levels do not adequately cover the cost of operating assets in this trade,” said Jack Yen, President of Evergreen Marine Corp. and a member of TSA’s Executive Committee.  “Without this additional revenue, along with further steps to lower operating costs, carriers will continue to lose millions of dollars on a daily basis.”

In related news, the TSA Carrier’s announced plans to amend its agreement on file with the FMC to allow members to discuss matters relating to slow steaming and environmental initiatives.  The TSA’s 15 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, Maersk Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services.  Visit www.tsacarriers.org

The Westbound Transpacific Stabilization Agreement (WTSA), FMC Agreement No. 011325, whose member lines serve the U.S. export trades from the USA to East Asia, announced a general rate increase for dry cargo rates effective February 15, 2010.  This GRI is in addition to the GRI that was effective December 1, 2009.  The Feb 15, 2010 GRI will increase rates for cargo originating at the ports of Los Angeles and Long Beach US$ 80 per 20ft ctr and US$ 100 per 40ft ctr.  The Feb 15, 2010 GRI for dry cargo from all other origins, including other West Coast ports, all-water shipments via the U.S. East and Gulf Coasts and inland point intermodal moves, will be US$ 120 per 20ft ctr and US$ 150 per 40ft ctr. 

The Feb 15, 2010 GRI is part of broad effort by the WTSA Carriers to restore rates.  It follows a GRI for refrigerated cargo of US$250 per 40ft reefer ctr from West Coast ports and US$300 per 40ft reefer ctr from all other origins that will become effective on January 15, 2010.  “Carriers face a very difficult business environment in 2010,” said WTSA executive administrator Brian M. Conrad. “Westbound cargo is going to have to make a greater proportionate contribution to overall sailing costs, if lines are to keep pace with cargo handling, equipment management, documentation and other operational requirements.”  The WTSA’s 10 member carriers are American President 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 info visit www.wtsacarriers.org.